Virgin Australia has been on a transformation program over the past seven years from their original concept of ’Virgin Blue,’ a small low-cost carrier founded by Richard Branson in 1999 with a single aircraft.
Continue reading: Will Virgin Australia Ever Join A Global Alliance?
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Honestly these sorts of airline business articles written by enthusiasts like James with no real business sense (particularly of the airline industry) are painful.
- “Their passengers who for years have longed for the simplicity of a real alliance”. And supposedly “losing them customers.” What proof do you have of this?
- You somehow transition to the idea that the CEO should be fired. While that may be the case, I would bet the financial performance matters a lot more to investors than the complexity of lounge access policies.
- It might have made sense here to acknowledge the many sizeable global carriers that aren’t part of alliances either?
- it also would be helpful to talk about some of the concrete benefits of alliances from a business sense...rather than just the views of a points enthusiast.
Second rate, money losing airline with minor international presence. If anything, it would probably be with Delta/ Sky Team due to their joint venture.
The days of the alliance being that important are over, from the airline's perspective at least. What's most important is just having the solid commercial relationships it has, the Delta one being the most important.
As far as Etihad Partners - that was never a thing. I worked at Etihad at the time it was announced and it was never a thing that anybody could explain, and it was always described interally as "not being an alliance". Nobody understood it, and that's why Virgin didnt go along - they couldnt make sense of it.
@ Jason - this is a blog dedicated to miles and points so I'm looking at the situation from that angle, as a long-time frustrated velocity member.
I've been a very active member of the Australian frequent flyer community for many years, and have heard velocity members time and time again saying they've switched to Qantas because they were so frustrated with this 'virtual alliance'.
While the shareholders obviously have a huge say in the direction of the airline, I suspect that John has not pushed for an alliance membership and am questioning how much more he can do with the airline that he hasn't done already.
I don't think the both Virgins' (Atlantic and Australia) current market situation requires Skyteam or any other alliance membership. Skyteam is basically Delta and Friends. But Virgin Atlantic, another Delta friend (or 49% child), is not interested in Skyteam membership as well. Deepened individual relationships with stronger airlines make more sense. And the both Virgins share the common partner, Delta.
NZ's divestment from and ending joint venture agreement with VA complicates the problem. They could have formed a 3-way JV with SQ. SQ can get further involved with VA but I don't know if NZ will like it.
HNA group and Etihad will not be very helpful. The former is threatened by the Chinese government and forced to divest foreign investments. Probably they will not divest from VA but additional cash injection will not happen. The latter, as we all know, is busy dealing with their own problem.
So, yes, they have a strategic dillema, especially if they want a longhaul international expansion. I don't know if the CEO is a problem, but I remember NZ exited VA after NZ failed to oust Borghetti.
Lucky - you should really consider what you want your media business (your blog) to be. Since you have those pay-by-article posts the quality has clearly given way to quantity.
And no, I don't just mean this post.
- oneworld: AA & BA’s funhouse for friends.
- Star Alliance: a ruthless cartel run by Germans.
- Skyteam: more like Delta and its b*tches...
(It’s just some avgeek humor, don’t take it seriously)
if you think alliances are useless for the passengers, remember the earlier fiasco when DL threw a screaming infant tantrum and tried bullying KE by sending them to Group 4 mileage earning charts ? why should i as a passenger be penalized for their incompetence or their turf war ?
with an alliance of 28 airlines, i get to pick whom i want to patronize instead of having that decision made for me by entities that only care about shareholder return.
Of the partners listed, they're all basically equivalent in terms of earn - actual points per mile rates differ between partners but this is the case with any program (including Qantas Frequent Flyer, AAdvantage, SkyMiles and KrisFlyer, just to name a few). Thankfully status credit earn is the same on all eligible partner itineraries. What mechanisms have been used to determine which airline fits in which bucket here? Why aren't the other HNA airlines listed?
Air Canada isn't a fully-fledged partner as yet, but the issue here seems to be on Virgin's side ( http://australianaviation.com.au/2018/01/air-canada-looking-to-deepen-partnership-with-virgin-australia/).
The bigger issues here are the woefully inconsistent points earn policies and blatantly misleading advertising with regard to status benefits. For example, Platinum members earn a 100% points bonus on VA and DL-marketed flights as long as you interpret 100% points bonus to mean 1 point per mile flown (resulting in a 50% bonus for Platinum members in J but a 200% bonus for Platinum members in deeply discounted Economy).
None of those issues are related to being in an alliance - they're related to the gross ineptitude on display within parts of the airline. The handling of elite members has been a display in incompetence for over a year now, with the staff involved unable to comprehend the most basic questions without multiple, redundant explanations.
@James, your observations are very accurate concerning the future of Virgin Australia. They had great potential, especially when they started flying those A330s domestically (about the same time they decided to go the premium route), and also when they properly aligned the V-Australia arm. But where has it all gone? I was also a frequent flyer and unfortunately, the product has not kept up with Qantas. They still have proportionately far too many narrow-bodies, plus the on-again, off-again routes are annoying.
On a side note, I never had issues accessing Singapore Airlines' lounges with Velocity Gold. But that was a couple of years ago, and can't say what it's like now and also with their other airline "partners" (Delta, Etihad, etc).
It's only a matter of time before Etihad sell part of their shares in VA & then, SQ will pounce & do a full takeover. The Australian Stock Exchange has been placing pressure on VA being on the open market with such a little margin. SQ has always wanted control of VA & the Australian government has also previously said they would be a good fit for the carrier. As the two countries have such strong ties & Australia is one of SQ biggest markets.
VA will be better within Star Alliance and definitely not with Skyteam or Oneworld..
VA can concentrate in building a better network to North and South America while Asia, Europe, Middle East, Africa can be served through partners..
Furthermore constantly improve their domestic and trans tasman as well south pacific market. QF and NZ have good products. It is actually a tough market for these 'Ozeanic3' airlines.. with SQ still poking around which have a huge share and traffic from/to SIN..
It was a great thing when Air NZ withdrew from their whining, moaning, interfering ways. They added nothing to the business and their utter incompetence had already sent one Australian carrier bust ( Ansett) through an abysmal attempt to access the domestic market.
SkyTeam is the only alliance that makes sense now, particularly if they have genuine international aspirations to/through Asia ( Vietnam is the only SkyTeam member with any real presence in Australia, plus a few Delta flights).
@ Paolo - Garuda has a bigger presence in Australia than Vietnam Airline I would have thought!
The problem with SkyTeam is it has never been an aspirational alliance. No-one starts an airline saying 'one day we hope to join SkyTeam' - it's more 'The best of what's left'
Well written, James.
I completely agree, I've been a VA Plat for 8 years and find the stagnation frustrating. JB must be a fabulous diplomat having that dysfunctional set of shareholders. It is a mystery to me how those airlines all hold way less than control and why SQ didn't take control when NZ bailed out.
VA is at a crossroads now with the NZ alliance terminating, it means I will continue to preference NZ on my business class flights to the USA and earn Kris points instead of Velocity.
While VA has a sale price running now through the agent I use (mid $5000 USA return if booked by 22 May, according to Roundabout Travel), generally they are the most expensive to/from LAX. I even got a QF ticket for less recently.
I also gave up on redeeming Velocity points for business to LAX as there appear to be almost ZERO seats available.
The final frustration is the plateau of Platinum, once I earn 800 SC there is little incentive to keep going other than Partner Gold or Plat when I earn a bunch more. Given my partner is also Plat, that means nothing.
@ James I think you have been accurate. No chance I fly Virgin Australia because of their lack of "connections". They are stagnant. I didn't even bother using VA tickets I'd get for free every year through Amex Platinum charge card.
@ Paolo you forget that Korean as a skyteam member has a presence in Australia as well
@James
Yes, of course, I forgot Garuda .
But if Virgin joins SkyTeam it would far improve travel options for international visitors to Australia ( I guess it would For Star Alliance as well).
I don't fly Virgin at all but would if they joined an alliance. At the moment there is no compelling reason to choose them.
I'm not sure a UK resident is a typical Velocity member. James' is a legitimate perspective but I am pretty happy with VA overall as a Platinum member. However, I do have close to 2,000 SCs sitting frustratingly unusably - how about lifetime Platinum or The Club for example, or upgrades permitted from cheapest fares? I had lifetime Star Alliance Gold when Ansett was sunk by Air NZ and lost over a million points as well, so it was a long haul back via lifetime QF Silver etc before VA started.
Great article James. To CS, quit whining.
I am a loyal Velocity member and have often been left frustrated by their limited planes and lack of route expansion plans. But one must realise that unlike Qantas, Virgin is not exactly rolling in Cash. When they launch a new long haul route, like they recently did on SYD-HKG, they want to really bed it in and ensure profitability. They are not an airline that can afford too many fingers in the pie at the same time, like the Gulf carriers.
On your point about JB, yes, absolutely time for him to move on.
On alliances, I would love to see SQ take taje greater control and if that means they upset Delta, so be it. The future lies in flights to Asia and for that, SQ's route and deep pockets, plus decades of experience in running profitable airlines is hard to go past.
SQ wanted to buy VA when NZ pulled out, Borghetti instead went running to the Chinese for money.
The problem with VA is that they don’t attract anywhere near the revenue that QF do (telling when and soak up almost all of the profit pool with 60% share). I agree their business class is very good, the problem is the rest of the experience is rather low rent compared to QF. Yet they can’t compete on price because their costs went up and are now basically the same as QFs.
James - one other achievement is the more recent introduction of extra legroom economy seats and giving them free to platinum members. It’s a key differentiator between VA and QF and makes up for the fact that the QF f&b service is more comprehensive in economy. It’s actually kept me at VA as it’s a great perk particularly for east-west flights.
Two fundamental concerns about this article.
1. Squaring up John Borghetti as the fall guy for the perceived lack of change at VA, having just pointed out that it is the underlying ownership of VA that is the core issue!
2. Jumping on the Alan Joyce is the hero of QF mantra, even quoting nonsense about new aircraft as an achievement when QF is facing a potential crisis in fleet renewal over the coming years and try ringing a call centre and face a 45-60 minute hold - an inexcusable situation (ridiculously Joyce's package worth the same as the salaries of the 250 call centre staff he sacked to get a "profit")
VA may not be perfect, but if offers the frequent flyer some benefits and opportunities, such as:
- Family pooling of points and status
- Transfer of points to SQ
- Ability to seat select regardless of status (the QF system is a joke when trying to get seated on a 737 as Gold or lower)
- A business class cabin not overtaken with staff
- A significantly cheaper J class product on the routes I happen to fly domestically
- You don't need status or J ticket to visit domestic lounges (if you have AMEX)
Being based in CNS, a city QF has all but deserted internationally, I can now get access to HKG on HK Airlines via VA at very very competitive J pricing (just booked $1900 return): half the price of QF without the need to backtrack to BNE or SYD or MEL.
In any case, a smart FFer shares their business!
IMHO it would great if SQ increased its stake...but that ain't Borghetti's call...
Seriously, if "analytical" articles like this are to be presented they need to be far better researched, thought through and argued...sitting on 100s of flights doesn't make you competent in these regards...
Air NZ left Virgin Australia over ego, not good business. Their Gold and Elite customers will now no longer have access to lounges in Australia in many places, and ticketing and luggage check through will become much more complicated. Especially as they have not parted with VA on good terms. Having codeshare was the next best thing to running their own domestic airline. Australia is New Zealand’s biggest tourist market and around 1 million kiwis live there.
Most of Air NZ’s good rep and innovation was earned under the previous CEO. Domestically, they have a near monopoly and have consistently leveraged that into high profits which upsets many New Zealanders. Their much talked about social media presence recently involved a safety video shot in Antarctica, where they had a had a crash involving 257 people in 1979. A subsequent inquiry held the airline responsible and found the airline had lied and manipulated evidence. The crash and investigation is in living memory for many people.
A lot of good people work for Air NZ, though they are undermined by management who seem to believe they are the smartest guys in the room.
As a resident of Sydney and a Virgin flyer I would be happy with either Skyteam or Star Alliance.
Re lounge access in Sydney it’s still dependent on your destination. Our recent flight to Bali we used SQ while the LAX service was using Etihad, Transtasman is in NZ but that will change once the agreement with NZ pulls out in October.
Virgin Australia is a great airline but needs either a clear direction or massive investment , ideally both.
The fact that you can transfer Velocity and KrisFlyer miles back and forth essientaly almost makes VA part of the star alliance though still would be good if they joined an alliance that being said I don’t mind VA’s current situation they just need international lounges more planes and more routes
Talking about HNA Group, it's not a secret that Hainan Airlines wants to join an alliance. I can see them supporting Virgin Australia joining an alliance and then use VA as a launchpad.
Meanwhile, given that Etihad is in talk with Star Alliance, and them having a pretty good relationship, we might see something interesting here with Virgin Australia in 5 years...
Talking about HNA Group, it’s not a secret that Hainan Airlines wants to join an alliance. I can see them supporting Virgin Australia joining an alliance and then use VA as a launchpad.
Meanwhile, given that Etihad is in talk with Star Alliance, and them having a pretty good relationship with Hainan Airlines, we might see something interesting here with Virgin Australia in 5 years…
Etihad in Star Alliance? No thank you! Nobody wants an ailing child in his midst! VA in Star Alliance? Yes, they can! SQ should be the sponsor and integrate VA in the *A network.
Nice article, yes VA is an airline with great promise and many infuriating half-finished breakthroughs - think of the lounge security-entry spoilt by having no bag-check facility, or the super business-class seats SYD-PER now a lottery, randomly replaced by uncomfortable 737's as the A330's are diverted to Hong Kong routes. And the excellent award-availability to Europe on EY spoilt by the ridiculous $500 cover charge. Or the useful alliance with DL allowing domestic North American awards, but all of the (spotty) availability will disappear 21 days ahead. As for transpac biz awards, even DL's miserly quota of Skypeso seats is probably more than VA's blank award-calendar. Even Qantas still has a handful of transpac biz awards, albeit with colossal surcharges.
But you can't really blame John Borghetti, he's done a fantastic job to bring Virgin up to Qantas' level. It's the shareholders and board demanding constant "enhancements" because seats continue to sell regardless in economic boom times.
“Australia has some of the best business class in the world, between Qantas and Virgin Australia.”
IN WHAT WORLD DOES THAT STATEMENT MAKES SENSE???
I can think of a dozen airline that has FAR better Business Class product and service than QF or VA. Where do I start...well lets see...SQ, CX, QR, DL (A350), JL & KE (Apex), BR, CI, NH, GA, VS, EY, etc.
It makes sense if you quote the full sentence, instead of missing out the critical qualifying word “domestically”.
He’s arguing about internal flights.
(Though Australia is so huge that I’m not sure it makes much sense to compare it to domestic flights in, say, teeny-tiny UK)
Looks to me like you’re just trying to pick a fight!
Problem is that while NZ and UA are members of Star Alliance, they will take every opportunity to veto SQ (or any other airline) attempt to sponsor VA into Star Alliance for numerous reasons. That's even in the unlikely case of SQ making a move to take over VA.
SQ had their chances to purchase a greater stake into VA when NZ exited, but chose not to.
Basically SkyTeam is VA's ONLY realistic alliance option since VA burnt bridges with NZ and UA. NZ will allegedly want VA to revert to a domestic only carrier, a SQ controlled VA (with or without Borghetti at the helm) will not honor that request and Luxon will still use his veto to decline VA's entry into the Star Alliance.
Allegedly NZ (Luxon) wanted VA to drop all international and revert to being a domestic only carrier at the time of his attempt to oust Borghetti, all other shareholders (Etihad, SQ, Branson, etc) declined for the reason of that's being completely selfish.
United also has issues with VA for past reasons, including former CEO's Godfrey's decision to drop UA and to go with Delta as the US partner just prior to leaving Virgin. Whilst Borghetti and Delta are the best of buddies, in addition to rumours in many forums of DL wanting to purchase a stake into VA, VA and UA co-operating is not likely to happen anytime soon.
@Harry Hv
I agree. Virgin has some great concepts such as Premium Entry and Family Pooling. However Virgin just hasn't followed through with their idea of becoming a full service carrier and are constantly devaluing their loyalty benefits. Examples such as an incomplete domestic lounge network (where's Hobart?). No international business lounges. Massive Etihad surcharges. Getaway flights that only provide a miserly 5 status credits and no points bonus or fly ahead. Premium entry closed on weekends. Loss of international partners (e.g. Air New Zealand).
Whilst their business product is quite competitive, their economy experience is decidedly low-rent. In-flight catering is downright terrible.
Virgin Australia can't join Star Alliance when Borghetti has bad blood with NZ's Luxon, and there are also long standing issues with United Airlines dating back to JB's predecessor. As mentioned on other blogs from other travellers, both Airlines (especially NZ) would veto any attempts by Singapore or other *A members trying to sponsor Virgin Australia into the Star Alliance
Also, United wouldn't be happy to VA join when they are long time best mates with Delta, in addition to Delta having a JV with both Virgin Atlantic (plus a ownership stake) and Virgin Australia.
Basically SkyTeam is Virgin Australia's only alliance option considering the bad blood with some of the larger Star Alliance members.
Nice article James I appreciate your efforts here and can agree alot in your post.
Someone like yourself has probably flown way more VA flights than some of the commenters on here put together.
I think VA's partners are solid but Qantas having Emirates and Oneworld severely squashs their prospects for rapid growth, They are too easily outmuscled.
I was overly loyal to Qantas dumoed them purely for VA because of tgeir alliance with Singapore Airlines.
@Rio
Thanks fot the info! Who have known that VA has made so many frenemies! I like VA's business producr bith internationallly as well as domestic..I wished there is a chance to get inthe The *Alliance boat..Seriously I can forgo with UA and NZ..fir the saje if keeping VA..
SQ themselves aren’t that pleased with VA anyway, They were blindsighted by VA as they were about to launch an offer to buy VA when Borghetti announced they were selling a stake to HNA, which diluted SQ and everyone else’s share.
The fact that VA now places so much emphasis on HNA and connections through HKG would no doubt irritate SQ... wonder how long before they dump VA too?
There are also news articles of HNA and EY may have to sell their stakes in Virgin Australia due to their financial situation. In addition, with Virgin's long-time friend and Trans-Pacific JV partner Delta lurking in the background and being coy over their future intentions by not ruling out buying a stake in Virgin Australia in the future, Borghetti may get his earlier suggestion of Virgin Australia joining SkyTeam. ( https://www.smh.com.au/business/companies/delta-air-lines-coy-on-intentions-toward-virgin-australia-20160412-go3zq0.html)
If Delta does end up buying the EY and/or HNA stakes, they would also basically have turned Virgin Australia into Delta Air Lines Australia (much like how Virgin Atlantic is Delta Airlines UK), this would basically limit VA to domestic, NZ, Trans-Pacific and perhaps China to connect to their partners (even if the rumours of CZ leaving SkyTeam for Oneworld and HNA being their replacement does occur). All other international would've been handled by partners.
There have been many comments on this thread that are quite insightful, whilst others are a bit silly to be honest.
Business isn't based on emotions or concerns of "bad blood" - rational, data-driven discussions are the basis of decisions in any reasonable boardroom or executive meeting so the statements made by various people regarding NZ vetoing SQ moves to introduce VA into Star Alliance can be discarded.
Regarding DL not ruling out buying shares in VA in future, of course they're not going to do so - they've had very successful purchases in MX, AF, KL, VS and others when opportune. That's not "playing coy", rather it's simply a case of an agreed communications strategy being executed.
What incentive do DL have to purchase a portion of VA? There's a JV in place that is clearly operating *very* well (look at the points earn bonus for VA elites on DL and the way DL treats VA elites) and VA have DL TechOps perform their B737 engine maintenance. Outwardly, things are working well there.
As has previously been stated by VA's CEO, joining any alliance would immediately have their various anti-trust immunity agreements scrutinised. Although the NZ agreement is now effectively gone, the other agreements still have value.
@Rio - I quite like your thinking, however there's a massive flaw in your analysis. Delta basically run SkyTeam, however they treat their JV partners extremely well (as evidenced by the massive uplift in relations with Korean Air with the announcement of that JV). There are no joint ventures in place with the other SkyTeam airlines in the region, and China Southern have never been particularly well regarded by Delta in terms of codeshare or reciprocal benefits for elites in the programs of each airline.
DL are getting every benefit they seek from their JV with VA at present. Their operational discipline and IT competencies would do VA wonders though - I'd rather you be right than current indicators be indicative! 🙂
I’m living in Australia, and flying at least 3 times/month domestic. I used to fly Virgin, but gave up because frequent flyer program is too Aussie.
Qantas is now happy, with my Platinum level...
As I am also Platinum in SkyTeam alliance, no doubt I would use 100% Virgin flights down under if they were joining this alliance.