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What went wrong at Virgin Australia…is it a case of “if it ain’t broke don’t fix it”?

June 16, 2020 Headline News No Comments Email Email

You might remember the very exciting launch in 2000 of Virgin Blue, as Virgin Australia was known then, with this cheeky new airline slashing prices and initially flying a single route between Brisbane and Sydney, but quickly growing offering amazing no frills travel for Australians, much to the chagrin of Qantas.

The model worked though, with the good old Virgin Blue a great success, with being such a real thorn in the flesh of Qantas, leading the flying kangaroo to create Jetstar in 2003 to compete with Virgin Blue, with Jetstar also a great success, with some saying that at times Jetstar is how Qantas survived!

Now doesn’t that tell you something, well at least it tells me, that the two low cost carriers were a great success, with many millions of Australians that had never been able to afford to fly before, now traversing this great and huge nation at prices lower than ever before?

What is also interesting is that Jetstar has stuck with the “if it ain’t broke, don’t fix it” low cost carrier model, even today still offering no frills, with flights at low prices and I suppose they could do that because they were owned by Qantas which had all the frills.

Meanwhile back in Virgin Blue HQ, the smell of aviation fuel was having its heady impact with the success of Virgin Blue perhaps going to the head of the those with their hands on the corporate control of the airline saying that “the low cost model was so successful that it became the fastest growing Virgin Company in history”, and  “it welcomed its millionth guest within its first year of operation and three years later floated on the Australian Stock Exchange at a valuation of A$2.3billion.”  All great stuff, but the major issue rather like an elephant in the room was that the airline was still not making a profit and it appears never had or would!

You see, I reckon that if Virgin Australia had stuck with the low cost model, they would not be in the position they are in now, but they decided to change the model to being a full service carrier and go on to a head on collision course with Qantas and internationally with other airlines….with disastrous consequences

What is also very interesting and has become very clear that Virgin Australia was way out of its depth in debt if nothing else and even without COVID-19 would have hit the wall, with the cause of that being that they had moved away from the original low cost carrier model and the “if it ain’t broke don’t fix it” model, to the “it ain’t broke and while it does not need fixing at all, we are go to in any case” model!  What this meant was that it appeared that the airline was committing aviation suicide.

Just to help you get handle on the evolution of Virgin Blue/Australia and it makes interesting reading, they have these timelines on their web site and I have highlighted the points at where I think they were pursuing the correct business model in green and the what I believe was the wrong business model in red – and I have added some comments in italics, with most of my “Oh No” comments are the things I believe showed Virgin moving away from its core low cost carrier model, into being a full-service carrier, which were clearly expensive initiatives, which equally clearly it appears the airline could not afford: – 

2000

  • Virgin Blue’s first flight was DJ214 from Brisbane to Sydney on 31 August 2000. [The perfect low-cost carrier model start small and carefully.]
  • The airline had one route, two aircraft, and a dedicated team of just 200 people. [The perfect low-cost carrier model start small and carefully. By its demise the airline had well over 10,000 staff – way too many to be sustainable.]

2001

  • 14 new routes were launched, expanding to a true national domestic network. [The perfect low-cost carrier model start small and carefully.]
  • We welcomed our millionth Guest onboard in June 2001.

2002

  • Nine new routes launched. [OK but maybe too quickly?]
  • Patrick Corporation acquired a 50 per cent share in Virgin Blue Airlines. [Mmm, investors want a return on investment which they would never get

2003

  • Launch of Virgin Blue’s holiday arm, Blue Holidays
  • Virgin Blue Holdings floated on the Australian Stock Exchange, December 2003. [Mmm, investors want a return on investment which they would never get]
  • Patrick Corporation invested a further $137m at the time of the Initial Public Offering. [Mmm, investors want a return on investment which they would never get]

2004

  • Launch of Pacific Blue, a New Zealand-based leisure-focussed international airline offering flights between Australia, New Zealand, the Cook Islands, Fiji, Tonga and Vanuatu.

2005

  • Launch of Polynesian Blue in partnership with the Government of Samoa to launch. The first flight departed Auckland for Apia of 30 October.
  • Virgin Blue became first Australian airline to offer an online Web Check-In service.
  • Virgin Blue’s 50th aircraft went into service. [OK but maybe too quickly?]
  • Launch of our loyalty program Velocity Rewards.
  • Patrick acquired a further 17 per cent of Virgin Blue for $346m, giving it a controlling 62.4 per cent stake in the company. [Mmm, getting dangerous?]

2006

  • Toll Holdings acquired Patrick Corporation and therefore took a controlling 63 per cent shareholding in Virgin Blue. [Mmm, getting more dangerous?]

2007

  • Plans to establish a long-haul international airline, V Australia, announced. [Oh dear, the writing is on the wall – the wrong direction, moving away from the low-cost carrier model and creating a financial disaster.]
  • Virgin Blue launched Australia’s first government-certified airline Carbon Offset Program.
  • Pacific Blue launched domestic services in New Zealand.

2008

  • Launch of Virgin Blue’s Premium Economy product. [Oh dear more writing on the wall – even further in the wrong direction, moving even further away from the low-cost carrier model and creating a financial disaster.]
  • Toll divested its controlling stake in Virgin Blue Holdings, making Sir Richard Branson’s Virgin Group the largest single shareholder at that time, with 25.5 per cent. ]K’ching – time to cash in and being walking away leaving it to those who cannot escape the smell of aviation fuel!]

2009

  • V Australia’s inaugural flight from Sydney to Los Angeles (February) and Brisbane to Los Angeles (April). [Oh dear more writing on the wall – even further in the wrong direction, moving even further away from the low-cost carrier model and creating what would be a financial disaster.]
  • Virgin Blue lodged application with the US DoT and Australian Competition and Consumer Commission (ACCC) to operate a Trans-Pacific joint venture with Delta Air Lines Inc. (The ACCC authorised the joint venture for five years on 10 December 2009.) [Oh dear more writing on the wall – even further in the wrong direction, moving even further away from the low-cost carrier model and creating what would be a financial disaster.

2010

  • Appointment of John Borghetti as the new Chief Executive Officer and Managing Director, effective May 8, 2010.  [Great guy but from Qantas a legacy, full-service carrier background, who drove the full-service model and we all know the disastrous results!  Interestingly the Virgin Australia web site nor this timeline on their site does not mention founding CEO Brett Godfry leaving the airline in 2010.]
  • Virgin Blue became the first Australian airline to offer remote check-in via your mobile, called “Check-Mate!
  • Virgin Blue Group of Airlines and Air New Zealand seek regulatory approval to create a trans-Tasman alliance. (Final approval was received from the Australian Competition and Consumer Commission and the New Zealand Ministry of Transport in December 2010.) [Tough cash absorbing market]
  • Virgin Blue awarded Best Low-Cost Airline (Australia/Pacific), in the 2010 Skytrax World Airline Awards – the fourth time Virgin Blue won the award, also winning it in 2002, 2004 and 2008.
  • New business strategy – the Game Change program – announced. [The real beginning of the end!]
  • Comprehensive partnership with Etihad Airways announced, including plans for V Australia to commence flights between Sydney and Abu Dhabi in 2011. [Disaster!]
  • Announced the introduction of a total of four Airbus A330-200 aircraft to the Virgin Blue fleet to operate Australian trans-continental routes. Two scheduled for delivery in May 2011 and two for early 2012. [Expensive and not necessary for the low-cost model, which the airline was now moving well away from.]

2011

  • V Australia launches new services between Sydney and Abu Dhabi [Disaster!]
  • Implementation of comprehensive partnership with Etihad and Trans-Tasman alliance with Air New Zealand.
  • New uniforms designed by Juli Grbac are launched [Why?]
  • Luke Mangan inspired new menu options are revealed [wrong model]
  • A330 Coast to Coast Business Class is announced and goes on sale [wrong model]
  • Australia’s first Lounge Premium Entry and Premium Valet at Sydney Airport opens [wrong model]
  • Virgin Australia is announced as the company’s new name [Why get rid of a well-established brand or keep Virgin Blue as the low-cost carrier and establish Virgin Australia as full-service carrier?]
  • New lounges open in Melbourne and Brisbane [wrong model]
  • Virgin Australia Airlines and Delta Air Lines received final approval for their trans-Pacific alliance [Oh no!]
  • Virgin Australia and Singapore Airlines signed a landmark agreement to establish a long-term alliance [Oh no!]
  • Virgin Australia launches new Velocity frequent flyer program
  • ATR-72 aircraft enter into service on key regional routes
  • Virgin Australia Business Class goes on sale across the domestic network [wrong model]
  • Our international airlines, Pacific Blue and V Australia, adopt Virgin Australia brand [Why get rid of a well-established brand or keep Virgin Blue as the low-cost carrier and establish Virgin Australia as full service and international carrier?]

2012

  • Business Class is launched across the majority of Virgin Australia’s domestic network[Oh no!]
  • Virgin Australia awarded ‘Best Airline’ and ‘Best Staff Service’ in the 2012 Skytrax World Airline Awards
  • ‘Mobile Boarding’ passes and First iPhone app are launched
  • First Virgin Australia lounge on the Gold Coast opens[Oh no!]
  • Australian-first biodiesel trial in ground-service equipment conducted at Brisbane Domestic Airport
  • Contemporary design of new Airbus A330-200 are revealed[Oh no!]
  • New cabin interiors for Boeing 777 are unveiled[Oh no!]
  • Codeshare on select Virgin Atlantic and Virgin America services are launched[Oh no!]
  • Virgin Australia begins flying in New Zealand (formerly Pacific Blue) and Virgin Samoa (formerly Polynesian Blue) takes-off in Samoa
  • Alliance with Singapore Airlines goes live[Oh no!]
  • Inaugural Darwin-Sydney service is launched
  • Premium Valet at Brisbane Domestic Airport opens[Oh no!]
  • New inflight entertainment plans are announced including the Samsung Galaxy Tab 10.1 and Lufthansa Systems’ Wi-Fi steaming technology
  • New partnership with Surf Life Saving Australia launched to promote surf safety

2013

  • Becomes the Principal and Naming Rights Partner of the Melbourne Fashion Festival [Oh no!]
  • Unveils first Virgin Australia lounge in Cairns [Oh no!]
  • Launches new Sydney lounge with Melbourne Cup Carnival Hat Valet service [Oh no!]
  • Becomes Co-Major Partner of the Greater Western Sydney Giants [Oh no!]
  • SilkAir, the regional airline of Singapore Airlines, joins Virgin Australia’s Velocity Frequent Flyer program [Oh no!]
  • Becomes Official Airline Sponsor of 2013 Channel 7 Telethon [Oh no!]
  • Announces new five-year agreement with the AFL, extending the partnership until 2018 [Oh no!]
  • Launches the first Asia Pacific wireless in-flight entertainment system across its domestic and short-haul international network[Oh no!]
  • Becomes a Major Sponsor of Australia’s leading contemporary dance company, Sydney Dance Company [Oh no!]
  • The Australian Competition and Consumer Commission reauthorises the trans-Tasman alliance between Virgin Australia and Air New Zealand until 31 October 2018. [Oh no!]
  • Virgin Australia launches new codeshare and Frequent Flyer Agreement with airberlin of Germany [Oh no!]
  • Invests in new and upgraded facilities in Darwin’s International Airport expansion [Oh no!]
  • Virgin Australia, Brisbane Airport Corporation and the global market maker in sustainable jet fuel, SkyNRG, announce a feasibility study into the creation of Australia’s first “bio-port” at Brisbane Airport
  • Velocity Frequent Flyer unveils partnership with Visa for the Global Wallet™ [Oh no!]
  • Completes acquisition of Skywest Airlines Ltd
  • Introduces a single VA designator code and the Sabre booking and check-in system across its domestic and international networks
  • Velocity Frequent Flyer unveils Australia’s first and only airline loyalty program in Australia to provide Status Credits on Reward Seats

2014

  • Virgin Australia is named Tourism Australia’s platinum airline partner of the Australian Tourism Exchange (ATE) 2014 event [Oh no!]
  • Velocity Frequent Flyer reaches four million members
  • Virgin Australia unveils new Melbourne Lounge [Oh no!]
  • Launches the ‘High Flyer Passport’ initiative aimed at Australia’s youngest flyers ages 10 and under
  • Velocity Frequent Flyer partner with Virgin Galactic unveils Space Class granting a world-first upgrade to space on the first commercial spaceline and certified astronaut status [Oh no!]
  • New in-flight menus unveiled, designed by the Virgin Australia’s chef, Luke Mangan [Oh no!]
  • Carbon offset program expanded with the launch of a partnership with the Tasmanian Land Conservancy
  • Announces appointment of three new non-Executive Directors to the board of Virgin Australia: Mr Christopher Luxon, Air New Zealand; Mr James Hogan, Etihad Airways; and Mr Goh Choon Phong, Singapore Airlines
  • Launches new online check-in system accessible via smart phone, tablet or computer
  • Unveils new lounge menus across the domestic lounge network [Oh no!]
  • Opens first Australian ‘Premium Exit’ from Melbourne Lounge [Oh no!]
  • Announces the next evolution in the airline’s premium experience, unveiling a major redesign of the Business Class and Premium Economy cabins on the Boeing 777 fleet [Oh no!]
  • Tourism Australia and Virgin Australia expand global marketing deal for 2015 [Oh no!]
  • Virgin Australia and Singapore Airlines launch the world-first frequent flyer conversion initiative, enabling members of Velocity Frequent Flyer and KrisFlyer to convert Miles and Points between programs [Oh no!]
  • Business Class goes on sale for Trans-Tasman and Pacific Island routes [Oh no!]

2015

  • Virgin Australia begins Business Class for flights to Auckland as part of a progressive rollout in the New Zealand and Pacific Island markets [Oh no!]
  • Darwin Lounge and Alice Springs Regional Lounges open [Oh no!]
  • Appointment of new Virgin Australia Group Chairman Elizabeth Bryan
  • Announces long haul international cabin crew base, long haul international pilot base and dedicated East Coast charter operations base in Brisbane [Oh no!]
  • Tourism Australia and Virgin Australia reach landmark agreement, providing a $50 million boost for Australian tourism [Oh no!]
  • Major redesign of the Premium Economy cabin on the Boeing 777 fleet announced [Oh no!]
  • Virgin Australia Cargo is launched, entering the domestic and short haul international cargo market in Australia
  • Velocity Frequent Flyer acquires leading data analytics business Torque Solutions (Australia) Pty Ltd
  • Virgin Australia Group completes the full acquisition of Tigerair Australia [Never realised its potential!]

2016

  • Virgin Australia announces codeshare on Singapore Airlines’ new services between Canberra and Singapore [Oh no!]
  • Air New Zealand and Virgin Australia announce partnership to investigate options for locally produced aviation biofuel
  • Virgin Australia announces a new codeshare agreement with Italy’s national carrier, Alitalia [Oh no!]
  • Virgin Australia becomes the naming rights partner of V8 Supercars for the next five years and announces a new Supercars travel platform [Oh no!]
  • Virgin Australia unveils its new International Business Class experience, ‘The Business’ on the first of its Boeing 777-300ER aircraft [Oh no!]
  • Virgin Australia launches a new product, Economy Space + designed to make travel more seamless and comfortable [Oh no!]
  • Greening Australia and Virgin Australia join forces to launch a powerful new initiative to reduce soil erosion and help restore water quality on Australia’s Great Barrier Reef
  • Virgin Australia announces plans to form a strategic commercial alliance with HNA Aviation [Oh no!]
  • Velocity Frequent Flyer and BP Australia launch Pay with Points to enable BP customers to pay with Velocity Points at the point of sale
  • Virgin Australia announces plans to introduce inflight Wi-Fi on its Boeing 737-800, Boeing 777 and Airbus A330 aircraft [Oh no!]
  • Velocity Frequent Flyer launches Velocity Live, a new hub for live experiences and events [Oh no!]
  • Velocity Frequent Flyer and Flybys announce a partnership to open up brand new travel opportunities for shoppers [Oh no!]
  • Virgin Australia awarded best Business Class and best Cabin Crew by leading airline safety and product rating review agency, Airline Ratings
  • Virgin Australia launches new on-board safety video featuring cabin crew taking on Supercars driver Jamie Whincup in a race around Australia’s famous Mt Panorama racetrack [Oh no!]
  • Virgin Australia and trans-Tasman alliance partner Air New Zealand announce the introduction of night flights between Queenstown and Australia for the first time during the 2017 ski season
  • Virgin Australia announces plans for a codeshare agreement with Air Canada [Oh no!]

2017

  • Virgin Australia announces flights to Hong Kong and landmark alliance agreement With HNA Aviation, Hong Kong Airlines and HK Express [Oh no!]
  • Velocity Frequent Flyer celebrates 7 million members with points giveaway bonanza
  • Velocity Frequent Flyer and Energy Australia partner to power and reward Australians [Oh no!]
  • Virgin Australia launches flights between Melbourne and Hong Kong [Oh no!]
  • Virgin Australia launches extra legroom seating product, Economy X, a unique product offering in the Australian aviation market [Oh no!]
  • Virgin Australia partners with GoGo and Optus satellite to introduce inflight WiFi [Oh no!]
  • Virgin Australia launches services between Melbourne and Los Angeles [Oh no!]
  • Virgin Australia awarded ‘Best for Onboard Beverages’
  • Virgin Australia introduces innovative vision impaired user interface for in-flight entertainment [Oh no!]
  • Virgin Australia commences an inflight wireless internet connectivity trial [Oh no!]
  • Virgin Australia introduces Perth – Canberra Services
  • Virgin Australia and Air Canada launch codeshare services [Oh no!]
  • Velocity Frequent Flyer expands its world-class portfolio of earn and redemption partners, including forging important new partnerships with Flybuys, Energy Australia and Bupa [Oh no!]
  • Velocity Frequent Flyer and Fortune Wings Club announce new benefits for Frequent Flyers [Oh no!]
  • Virgin Australia unveils plans for comprehensive redevelopment of its domestic terminal at Melbourne Airport [Oh no!]
  • Velocity Frequent Flyer reaches 8 million members milestone
  • Virgin Australia commences the rollout of inflight WiFi to its Boeing 737, Boeing 777 and Airbus A330 fleets [Oh no!]
  • Virgin Australia and Air New Zealand boost Brisbane-Auckland services
  • Virgin Australia is awarded ‘Best Airline’ and ‘Best Airline Staff’ in the Australian/Pacific region at the World Airline Awards
  • Virgin Australia wins ‘Best Domestic Airline’ at the National Travel Industry awards
  • Virgin Australia is awarded ‘Best Business Class’ at the Airline Ratings ‘Airline of the Year’ awards [Oh no!]

2018

  • Virgin Australia rolls out self-service check-in facilities at Adelaide, Melbourne and Sydney Airports
  • Virgin Australia announces voice-controlled services for Amazon Alexa [Oh no!]
  • Virgin Australia Regional Airlines becomes the first Australian charter operator to offer inflight entertainment on charter flights [Oh no!]
  • Virgin Australia introduces world first pop-up check-in service at Sydney’s Overseas Passenger Terminal [Oh no!]
  • Virgin Australia makes history with fashion Runway in the Sky [Oh no!]
  • Virgin Australia launches services between Sydney and Hong Kong [Oh no!]
  • Virgin Australia announces services between Brisbane and Alice Springs
  • Virgin Australia Group appoints Merren McArthur as Chief Executive Officer of Tigerair Australia
  • Virgin Australia ups its game on the Tasman, announcing a suite of changes to its trans-Tasman services, including two new routes and increased frequency into key markets
  • Virgin Australia becomes the only Australian airline to offer WiFi on flights to and from Los Angeles [Oh no!]
  • Virgin Australia unveils new onboard offer and WiFi for all Trans-Tasman flights [Oh no!]
  • Virgin Australia sets 50-50 gender target for pilot cadets
  • Virgin Australia becomes the first Australian airline to allow passenger comfort devices onboard
  • Virgin Australia successfully completes the first trial of sustainable aviation fuel in an Australian airport’s regular fuel supply system
  • Virgin Australia bans plastic straws and coffee stirrers onboard flights and in airport lounges
  • Virgin Australia Group CEO and Managing Director, John Borghetti, announces his resignation
  • Virgin Australia announces the launch of a new international lounge network in Australia and New Zealand, with seven international lounges to be rolled out in Brisbane, Sydney and Melbourne, and in Auckland, Christchurch, Queenstown and Wellington [Oh no!]
  • Velocity Frequent Flyer reaches 9 million members milestone
  • Virgin Australia announces it will launch seasonal fights between Darwin and Denpasar [Oh no!]
  • Virgin Australia is awarded ‘Best Domestic Airline’ at the Australian Federation of Travel Agents National Travel Industry Awards
  • Virgin Australia is named ‘Inflight Airline of the Year’ at the Inflight Asia-Pacific Awards
  • Virgin Australia wins ‘Best Business Class’ at the Airline Ratings ‘Airline Excellence Awards [Oh no!]
  • Virgin Australia is awarded a Five Star rating awarded by the Airline Passenger Experience Association
  • Velocity Frequent Flyer is recognised as ‘Program of the Year’ and ‘Best Elite Program’ with ‘Best Customer Service’ and ‘best Redemption Ability’ in the Middle East and Asia/Oceania region airline category at the prestigious Freddie Awards

What is also interesting is that the green outweighs the red at the outset, but soon the red outweighs the green, with virtually everything in red being related to being a full-service carrier which is without doubt caused the sad demise of Virgin Australia.

I hope the two final bidders read this article and learn from it and as I said last week, https://www.eglobaltravelmedia.com.au/why-would-anyone-bother-buying-virgin-australia/ why bother buying Virgin Australia, when the best and cheapest approach has to be to start a new domestic Australian low cost carrier airline….oh and make sure you never have a whiff of that aviation fuel!

John Alwyn-Jones

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