Virgin Blue To Cut Domestic + International Routes

[Brad Myer]

NEW Virgin Blue boss John Borghetti hopes a redesign of the airline's networks, service and seating will double its share of the corporate market.
Less than a week after the airline shocked the market by cutting its profit guidance by up to 75 per cent, Mr Borghetti has confirmed the airline has an extensive review under way that includes shelving or streamlining low-fare domestic routes, and throws the spotlight on loss-making New Zealand operations and a possible revamp of V Australia.

The centrepiece of Mr Borghetti's strategy is a reduction in the airline's exposure to the leisure market and aiming to grab a bigger share of the corporate market.

Mr Borghetti told analysts from Macquarie Equities Research that he wanted to boost Virgin's share of the domestic corporate market from about 10 per cent to at least 15 per cent over the next 12 to 24 months.

However, The Australian understands the real target is closer to 20 per cent.

The new chief executive, who was instrumental in securing Qantas's massive market dominance in the corporate market, has already hinted at changes that would give premium customers better seating, revamped lounges and improved service on the ground and in the air.

He told the Macquarie analysts he believed efforts to date had been only marginally successful and loyalty would be a key focus.

For example, Virgin's reservations system, due to come online in November, would recognise and reward loyal passengers.

Other potential changes included a move to bring the four brands under one umbrella -- something difficult to achieve because of Singapore Airlines' veto over the use of the Virgin brand on international flights -- and the expansion of the group's patchwork of international alliances. The analysts suggested a major alliance with Singapore could be on the cards, or a closer relationship with Virgin Atlantic over Hong Kong.

International carrier V Australia, which was losing money and was not likely to break even this year, was also under a network review, the analysts said.

Virgin has indicated it is likely to at least delay the delivery of V Australia's final two Boeing 777s, and Macquarie speculated that leisure routes such as Fiji and Phuket were likely to be axed, while flights could be switched from Sydney to Melbourne or Brisbane.

The analysts expected the review of the Virgin network to be concluded by the end of this month but said it would take at least six months to assess Mr Borghetti's "clear strategy of restructuring and repositioning".

"Given his in-depth knowledge of Qantas from his previous role, Borghetti is ideally suited to lead VBA's strategy of attacking QAN's lucrative domestic business market and reducing exposure to the leisure market," they said.

"Clearly, however, there will be some execution risk."

Anyone willing to guess which routes will be dropped?

[Kent Broadhead]

According to the article in the SMH (sorry, can't be bothered finding the link), Phuket and Nadi for VAustralia, but expanding LAX and South Africa.

Kent

[Harry G]

I have said all along, DJ was trying to snare the business traveller, particularly the Government tenders and that there planes would offer perhaps part full servcie to cater for this and take it up to QF - Borghetti was instrumental at QF in increasing business traffic and no doubt would hope the same will apply here.......
they do need to loose the "flying circus" tag and this is seen as going towards it.....
a nose to nose with QF

which then leaves the bottom dwellers to be shared amongst TT and JQ which will be interesting in itself and warrants a seperate posting

V Australia?? a full service airline going to a handful of places with a handful of planes with unsustainable fares?? sounds like TT in the early days and we know how that could have ended up!

[Andrew M]

Always said that Fiji was a waste of time for the 777-300ER.

The leisure market does NOT want a fully flat business class.

They want the cheapest price!

The announcement at the end of this year for their new domestic product will give their corporate market a push.

I suspect 8 business class seats
A proper premium economy
A regular "corporate" economy - (Full service, food + drinks)
A discount economy - Buy on Board (tight pitch)

[Ash W]

Andrew if you had a premium economy why would you then need a corporate economy?

[Andrew M]

Hmm not really sure what I meant with that quick post before...

So to clarify what I think may happen

8 x Business seats - Similar to Qantas domestic business
42 x Economy - Slightly more pitch than normal economy perhaps, but food, drinks and IFE included.
?? x Discount Economy - Standard seating, no free food, drinks or IFE.

That being said not sure that still trying to attract the "discount" traveler is a good idea. As V have learnt the leisure/discount traveler (Fiji) is not really a good market to focus on as they are too price sensitive. They want the cheapest price and don't care about much else.

Let Jetstar and Tiger deal with that end of the market.

Let Qantas and Virgin Blue deal with Business & standard Economy.

These are just my ramblings!

I do hope that V Australia don't have any changes to their hard product, which I doubt anyways as it would cost too much.

I did read recently that the on-board bars were not liked by a few within the DJ group and it was only put because a certain someone said they wanted it on the plane. Taking it out would create room for at least 3 more business class seats, and 4 more premium Economy seats. Although with the emergency exits/doors being in that location I am not sure if that would work. Either way a few more seats could go in without the on-board bars being there.

[Ash W]

Originally Posted by Andrew M

Hmm not really sure what I meant with that quick post before...

In your previous post you seem to mention 4 classes:

Originally Posted by Andrew M

I suspect 8 business class seats
A proper premium economy
A regular "corporate" economy - (Full service, food + drinks)
A discount economy - Buy on Board (tight pitch)

I couldn't work out the difference between premium economy and corporate economy as I would have though the premium would be the class with food and drinks.

[Andrew M]

Yes as I said I posted too fast :P

I do expect the following:

Business class to evolve from their not very popular current offer of "Premium Economy".

A full service section of Economy.

Perhaps a discount Economy section.

IFE to every seat

DJ currently have great lounges in the major ports, but are let down by an inferior product to QF onboard.

The recent changes to cabin crew being "more professional" further indicates the steps they are taking to get away from the face painting and forced jokes they used to tell on the plane!

[Harry G]

Flying Circus comes to mind......
stand up bars......... face painting...... yippee........

clearly they want the Bus traveller and Borghetti will steer them in that direction and as correctly put, the lesiure market can get sorted out between JQ & DJ
perhaps main concern could be for V Australia with QF flooding capacity on long haul routes - can V sustain that sort of push?? time will tell no doubt and I am sure there are persons better qualified than me to offer comment which is seen as credible.......

[Harry G]

correction....... JQ & TT not........DJ