Virgin Australia Appoints Controversial New CEO

Just a minor clarification though - Hrdlicka spent her time at Bain & Co., which is a consulting firm separate from Bain Capital (though they are closely linked and Bain Cap spun out of Bain & Co.). So she didn't work for the PE firm specifically though obviously the relationship is close and she would have certainly done PE consulting work as part of her time at Bain & Co. given that's a big part of their work.

This was always on the cards. The plan all along is to covert virgin Australia into a ULCC. It’s not great for the passenger experience but you will get cheaper domestic fares and a lower paid workforce (not good). Still, the business model will work better and Bain will make money.

"Virgin Australia will be a ‘hybrid’ airline, offering great value to customers by delivering a distinctive Virgin experience at competitive prices."

Has nobody learned the lesson that you can't be all things to all people? You go for a segment of the market, and you stick with it. Airlines that try to compete with the ULCCs on price inevitably end up driving down service and losing the higher-end market. Do the reverse and you can't compete with ULCC on price. It's a no-win.

Agree 100% with Ben's Bottom Line observations. VA is on the road to ruin under Bain Capital with this woman at the helm. Expect major labor ructions (already started I see) between Bain and the unions.
Virgin under Scurrah was an increasingly well respected airline in Australia, and a worthy competitor to Qantas. I have no idea what their so-called 'hybrid' concept will look like but I'm sure it will be greeted with very muted enthusiasm by former VA fan-boyz.
Bain Capital have badly misjudged how to run this new acquisition IMO.
As a certain person familiar with a failed airline would say: "Let's see what happens".

The writing was also on the wall when Velocity starting cutting back on International Partnerships (on top of dissolving their own international flights).

Plus there was also the two minute noodles in Business Class drama which also raised flags.

Then there was also the Bain/Branson lockout over stake and branding negotiations.

Safe to say that Virgin (or whatever they are called in the future) joining Star or SkyTeam is finally 'dead and buried'.

I believe that most in Australia who had been following VA for the past few year felt that Scurrah had the airline on the right track. He wasn't trying to compete with Qantas so much, their international flying was appearing more successful and coming out of administration was only going to help the airline with costs/debt reduced.

So the days of flying to LAX on my velocity points for free are long over. What a shame as it was truly great while it lasted

Don't forget that now Virgin have cut back on frequent flyer earnings too (as per Executive Traveller):
"Velocity members will no longer earn any frequent flyer points or status credits when travelling on a codeshare flight by any partner airlines which carries a VA flight number.
Oddly, it appears you'll still be able to earn those Velocity Points and status credits on partner airlines as long as your booking is directly with them – on a flight bearing their 'native' code, such as EY for Etihad Airways and SQ for Singapore Airlines."

They also are cutting lounge access when travelling on partner airlines and partner airline upgrades too. I don't think those will be reversed, could be the end of Velocity

Adam L, you make a good point. One of the challenges for any player in the Australian market is that it is so dominated by Qantas, especially the lucrative corporate market. In some ways this is similar to the dominance that BA enjoy in the UK. Unlike BA though Qantas have had leadership that realises you can only cut things so far before customers start to push back.

The reality is, I suspect, that no airline is realistically going to be able to compete with Qantas in Australia in that regard, rightly or wrongly many Australians regard Qantas with a huge degree of affection and it has staggering loyalty levels.

Borghetti left Scurrah with an absolute dogs breakfast of an Airline (in much the same way Hogan did on his departure from Etihad). Yes, some people liked it and it was seen as 'cool' but the reality was it had hosed money down a hole for years with no clear line of sight to a way forward. We will never know if Scurrah would have been the right man to turn it around, although he seemed to be on the right track, but once COVID arrived the result for the business was inevitable.

As to it's future, well I would be less than optimistic. Firms like Bain are in it to make money and the damage to the brand during the administration process means that many will step away from it, combined with the inevitable decline in higher yield premium 'corporate' bookings that are inevitable in at least the medium term as we come to grips with COVID. Australia is an interesting country, I lived in both Melbourne and Sydney, and Australians love to jump on a plane from city to city just for an hour long meeting. With the fact that these have stopped now and we have managed through zoom, etc. you do wonder how many businesses will realise that these meetings aren't all essential face to face and we see a longer term decline in the corporate travel market in Australia. If so that further reduces the case to spend a lot of money maintaining a premium product. If they want to play successfully in that market they have to have a fairly full network in Australia and that isn't cheap.

I suspect we will see a gradual slide into something more closely resembling a LCC. I simply don't see how they can hope to do anything else with it in the short term. With REX and Jetstar also in play and a probable reluctance of the new owners to essentially keep tipping money in to it (and a much greater reluctance for Lenders or Bond Holders to provide debt capital) I can see this ending in tears. I wouldn't be surprised if Vaughan Strawbridge and the team at Deloittes are collecting another large fee on this in a couple of years time.

Service businesses rise and fall on culture/employees. If she gets the "people" element wrong, they're doomed.

@Adam L
Totally wrong, sorry to contradict you.
On the highly competitive LON-NYC route several carriers tried to compete with BA as low cost carriers. British United tried, and was bought by Caledonian who in turn tried and was eventually bought by BA. Notably Freddie Lakers "Skytrain" tried on the then economical DC10s all economy, only to find that BA undercut him to the point of loss leading, which he couldn't do as he was all economy, and bottom line figure was bottom line figure.

Along came Richard Branson with Virgin Atlantic. Positioning the high revenue end as "Upper Class" and providing chauffeur driven cars, this gave him the basic income to match BA on their cost cutting exercises, because he, like BA had the flight largely paid for without economy fares.

Apart from the Covid crisis, Virgin Atlantic expanded worldwide based on this concept, with lounges, FF miles and all the other trappings.

So from this I conclude that a "Hybrid" carrier, gaining revenue from business flyers to subsidise economy, should QF choose to start an economy price war, has a good possibility of success.

It remains to be seen whether the new CEO is the right person to run such an organisation, because Richard Branson's personality had much to do with staff and passenger loyalty, which does not appear to be the case here.

I sense we have more of a Willy Walsh, Alex Cruz, O'Leary et al in Ms Hrdlicka. Perhaps she'll try to get Australia to join the EU, so that she too, can use cheap Polish labour!