Twenty years ago when Virgin Blue launched, it had a simple mission. The airline was built to bring low fares to a continent where few were to be found. Since that time, the airline — which is now known as Virgin Australia — has done nothing but add complexity to nearly every facet of its operation. Having now gone through the bankruptcy spa, Virgin Australia is trying to simplify once again. We’ll see how long this lasts.
A Short and Confusing History
On August 31, 2000, Virgin Blue first took the skies from Brisbane to Sydney. The marketing was heavy on the “low fare” promise, but that’s not what made the airline a success. What really made this work was — as is often the case for Virgin airlines — dumb luck. Just over a year later on September 13, 2001, Ansett Australia shut down. Ansett was the long-lived second operator in the market with Qantas (after the latter acquired Australian Airlines). With Ansett gone, it was hard for Virgin Blue NOT to succeed. And so, it flourished.
But what began as an all-737, all-economy, low-fare operator quickly went off the rails. In 2005, the Velocity frequent flier program was introduced. By 2007, Virgin Blue decided it wanted to fly to smaller markets, so it ordered Embraer 170/190 aircraft to supplement the 737 fleet. It also started increasingly partnering with other airlines. By 2008 it had launched a second class, premium economy, It also started V Australia to fly 777s on long-haul flights to the US and Asia. If that sounds frenetic, just wait.
By 2010, John Borghetti was tapped to run the airline. John came from Qantas where he was spurned for the top role in favor of Alan Joyce. When John went to Virgin Australia, he was ready to exact revenge. Really, he just wanted to take business away from Qantas and he worked on building a second full-service airline to serve the sparsely-populated country.
That meant consolidating all the random little airlines — anyone remember Pacific Blue? — into one Virgin Australia brand. He introduced a domestic-style First Class on the domestic fleet, added A330s for domestic trunk routes, and updated the long-haul fleet. Lounges were introduced, and Aussie-regional Skywest was tapped to fly regional props around Australia to feed the network. Then the acquisitions started.
In 2012, Virgin Australia picked up Tigerair’s Australian division. The main Tigerair in Singapore was folded into Scoot and took on that airline’s brand. Instead of just eliminating a low-cost competitor, Virgin Australia tried to revive the brand’s lackluster reputation and run it as a separate airline. Oddly, Virgin Australia kept the airline’s A320 fleet and let it fly, often in competition with the parent company.
Soon after, Virgin Australia bought its regional partner Skywest and renamed it Virgin Australia Regional. This was brought on to fly ATR props, but it also has Fokker 100s and even A320s for regional and charter operations.
Over those years, the airline burned through a whole lot of cash. To keep the airline going, it continued to sell bits and pieces of itself to just about anyone who showed interest. At one point, Air New Zealand was a large shareholder, but it walked away and took its commercial partnership too. It now works with Qantas. Etihad brought Virgin Australia in as a member of the Etihad Airways Partners group. Hainan’s parent HNA owned a chunk as did Singapore Airlines. Another Chinese group, Nanshan, bought Air New Zealand’s old stake. The airline had too many masters to serve, and it was buckling under its own weight as losses continued.
Borghetti left in 2019 and the new CEO tried to right the ship, but COVID-19 was the final straw. The airline went bankrupt, and now Bain Capital is trying to bring it back to life.
The New Plan
The plan now appears to be one that goes back toward a simpler time, but it’s not focusing on just being a low-fare carrier. No, instead, it wants to be a tweener, a “value” carrier that brings a good product at low fares. There aren’t a whole lot of success stories in that category, but well, Virgin Australia is going to give it a shot.
The exact plan isn’t entirely clear. For example, it is getting rid of its widebody aircraft, but it says “long-haul international flying important part of plan but suspended until global travel market recovers.” Uh, with what aircraft? I suppose it will just pick up something new when the time comes.
We do know is that Tigerair is toast and the A320s are being returned… but they will keep the operating certificate alive so they can start another ULCC whenever they think they need it. This plan is clear as mud. (Side note: That leaves Tigerair Taiwan as the only airline still flying the Tiger brand.)
We also know that mainline Virgin Australia will go down to only operating 737s. That means the A330s and 777s go away, as do the ATRs in the regional fleet. The only non-737s flying will be either Fokker 100s or A320s (or both?) flying regional and charter work.
The airline will focus on domestic and short-haul international. Presumably that includes Trans-Tasman along with some Pacific island flying like Fiji or the Cook Islands. And that’s really about all we know.
The press release reads like something that a consulting firm put together, but in short, it’s all about simplifying, providing value, and cutting costs. In other words, it’s what most companies do when they overextend and screw things up.
Is there really room for this kind of airline in the market? This leaves Virgin Australia competing with Qantas and the higher end and Qantas’s wholly-owned subsidiary Jetstar on the lower end. When demand comes back, there’s nothing stopping another airline from coming in and trying to do what Virgin Australia does better. That’s why the tweener airlines don’t usually work well. They try to serve different markets without hitting any of them on the head.
At this point, it’s just a waiting game. Will traffic return enough so that Virgin Australia can survive? If so, then just how long will it be before the airline decides to get cute and add complexity again?
