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Virgin Atlantic quitting Australia for the same reasons British Airways will … and why Qantas will ultimately stop operating internationally.

February 7, 2014 Aviation, Headline News 6 Comments Email Email

egtmedia59Virgin Atlantic axing its Sydney-Hong Kong service, which connects with its highly utilised Hong Kong – London service, comes as no surprise whatsoever to me and others in the industry, with the decision leaving British Airways as the only European based airline operating to Australia, and whatever they say, it will not be long before BA stops operating here too.

Virgin Atlantic A340 (1)Virgin Atlantic cited the reason for their withdrawal as the route was “no longer considered profitable” and that also comes as no surprise, as a once daily ultra long haul, at least from London service, on a dog leg route to Sydney, albeit via Hong Kong, cannot possible continue drive enough revenue and most importantly, profit to support the staff needed here in Australia to sell and operate the route, when the $A and $US exchange rates shifted.

While Virgin is a relatively low cost operator, with a reputation for not being the best salary payer in the industry, no airline can afford to have an aircraft sitting in Sydney for hours every day doing nothing, as in Virgin’s case, with the added expense not only the parking fees at the astronomically expensive Sydney Airport – just think what they charge you to park a car – but also the non utilisation of the aircraft while sitting in Sydney, when it could be profitably used elsewhere.

While the story is similar for already struggling and brand damaged British Airways, it is actually worse, with BA having higher operating costs than Virgin and having two Boeing 777’s on the ground in Sydney all day, and also, no cosy Qantas JSA to help market the route.

British Airways PlcSo, no real mental challenge that neither Virgin or even BA’s operations make any commercial sense, in what is the very tough world indeed of aviation today, in which, as the Divinyls said, “ there’s a fine line between pleasure and pain”, which in terms of airlines, it is a very fine line indeed between profit and loss, and what Virgin and BA are now experiencing.

The weakening Australian dollar or to be more precise, the strengthening US dollar has also meant that fuel and other costs that are based in US dollars have increased, also demonstrating how fine that line really is, with an airline’s routes becoming unprofitable so very quickly, as a result of a relatively small shifts in exchange rates – shows how tight the margins are!

Qantas is also directly affected by those exchange rate shifts, and what makes it worse for Qantas is that it has a very high cost base, with its routes also at the end of a very long dog leg, which along with the highly competitive environment from lower cost based carriers, all come together to make me believe that Qantas will gradually stop flying internationally.

My view is that the Kangaroo route will going first, with Qantas’ first stopping flying between Dubai and London, its Heathrow slots being handed over to highly profitable and much low cost base Emirates … then not long after, Qantas will stop flying to Dubai. At the same time, Emirates which will shortly have 90 A380’s and has ordered another 50, compared to Qantas, I think now has 3, will increase its services to Australia to compensate.

Other Qantas international routes will also disappear as Qantas becomes increasingly uncompetitive, unless it can save more costs and weaken the control of the unions, by offshoring much of its operations … perhaps even to Dubai?

By the way, I also still believe that Qantas’ A380’s will ultimately be handed over to Jetstar for high value, low cost or budget, massive economy cabins and small business cabins on a one stop route to Europe and those flights may be via Dubai or Asia.

Well, all interesting stuff indeed and while some might say that I am talking nonsense, who would have predicted how the world of aviation has changed in the last ten or so years?

Virgin Atlantic’s final flight from Hong Kong to Sydney will be on May 4 with the final return flight departing the following day and we wish Virgin Atlantic and all their highly professional Aussie staff well for the future.

John Alwyn-Jones, Special Correspondent

Currently there are "6 comments" on this Article:

  1. AgentGerko says:

    I agree totally about Virgin Atlantic and BA but not the rest. The current QF management, and Geoff Dixon was no better, have their sights firmly on QF becoming nothing more than a regional carrier. The glory days when QF had three different routes to the UK, including the fabulous Fiesta Route through Acapulco, are long gone, and their agreement with Emirates will no doubt see the UK eventually and sadly disappear from the network. Europe bound holidaymakers are dumping QF in droves because Aussies still want the traditional stopover in SIN/HKG/BKK which QF can no longer offer. Dubai is too close to Europe, and rather too boring to become a regular break point. But there’s no reason why QF cannot survive as a regional carrier and also to the US where the competitors are all fairly high cost full service carriers as well. I believe QF have taken delivery of 12 A380’s so I dunno where the correspondents 3 comes from. The daily A380s on SYD/LAX, MEL/LAX, SYD/HKG, MEL/LON and SYD/LON immediately puts that comment to bed. Sorry John, but I think you’re throwing out the baby with the bathwater. The Great Red Rat still has a bit of life in her and providing the managemtn can see a little past their Jetstar Uber Alles mentality then we should be able to see QF operating for the forseeable future.

  2. gnits says:

    …omg…it seems I’ve never been wrong with my assessment with qantas….high operational cost to maintain at home base and union control….qantas is right laying off more workers…and too bad it cannot compete with other airlines in the region because all of them have lower operational cost….this is just the abc of it all and yet the so called critics of qantas keep on looking the other way…

  3. Martin says:

    At the moment BA has a LHR – SIN terminator why don’t they send this through to Perth. If they could offer a single aircraft service to London and allow transit passengers to stay on board in Singapore I am sure this would suit the elderly passengers that visit their families here in Perth. The other factor is that since BA no longer works with QF the connections to the two BA services out of Singapore, from Perth are awful.

    If Emirates can offer 3 flights per day surely one flight via Singapore could be a favourable option for travellers.

  4. John Hollins says:

    There’s still plenty of scope for both Australian and European Airlines to compete on the Kangaroo route and other routes between Australia and Europe. They just need to work together more. For example, Qantas can jointly run the London with Virgin Atlantic via Hong Kong. They could also jointly service all major European using local carriers, eg. Qantas-Lot to Warsaw via Beijing. These alliance work and give people choice. Forget the One World or Star Alliance rubbish, you need to make deals that suit Qantas, not half the world’s airlines.
    Whether QF eventually survives as a full service, or a low cost carrier, they cannot surrender the jewel that is Europe to the Asian or Middle East carriers. They need to be there or they might as well just stick to being a domestic carrier.

  5. AgentGerko says:

    Virgin Australia has just signed a codeshare with South African Airways. This has to be a first. People will now be able to fly to Johannesburg either as a SAA (Start Alliance) passenger, a Qantas (Oneowlrd) passenger or a Virgin (non-aligned) passenger; all on the same aircraft. Thats a good example of airlines working together.

  6. robyn lawley says:

    OMG – we said that years ago when Joyce took the reins – QF will become a casualty of Joyces JQ ambitions – QF will only fly Australia to USA and domestically – and any route that is deemed profitable. Joyce will end his term, walk away with millions and our country of 23 million are left with his legacy – the demise of QF. Got to be proud to be screwed over by the leprechaun.

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