Virgin Blue's 'Airline of the Future' vision

[Will T]

I'm rather surprised that neither of these articles made these forums. Or that I missed them if they did! In any case, they're essential reading for those with an interest in DJ's long term strategy.

The source of both is Crikey.com.au http://www.crikey.com.au/business/companies/ , and both are by Ben Sandilands.

Virgin Blue’s ‘Airline of the Future’ project will change everything
September 16, 2009 – 10:46 pm, by Ben Sandilands

A glimpse of where Virgin Blue expects to be within five years was given by its co-founder and CEO, Brett Godfrey today when he told the aviation media it has a previously secret ‘airline of the future’ unit working on its renewal and growth.

Some features of that future will be:

•A single brand for V Australia, Virgin Blue and Pacific Blue,
•The offering of ultra low fares and a more spacious economy product on the same aircraft
•A wireless, paperless, portable device based process for booking flights, checking in, making changes, and earning and tracking loyalty points and status, and
•Internet on all flights
But before that happened V Australia’s contribution to profits would outstrip that of Virgin Blue’s domestic operations.


Godfrey then signed contracts with the management of Emirates in Australia to put the V Australia code on its A380 and 777 flights between Sydney and Melbourne and Auckland from 25-26 October, a move that leaves its own Pacific Blue services untouched.

In a clear sign that Virgin Blue was exploiting the tensions between the Qantas full service and Jetstar budget priced brands, he said Virgin Blue now flew more departures each day on domestic routes than either Qantas brand, and almost as many as Qantas mainline and Jetstar combined.

“We are the only airline to offer a premium product on all of our domestic flights,” he said. “And we are the only Australian carrier to offer a fully flat business class bed on all of our flights to America, as in fully flat, not angled flat, or wedgied flat.”

It would extend premium economy seating to all Pacific Blue operations, which are trans Tasman, NZ domestic and regional Pacific and SE Asia in scope. And premium economy would itself be upgraded in the near future.

Godfrey said it was simply wrong to declare that some routes were only leisure and others only business, when it fact there were always people disposed to buy a premium product to any destination and it was better to offer them a buying opportunity on every flight.

He said Virgin Blue had deliberately put itself in the middle of the market by choice, and was not trapped in a pincer movement between the low cost models like Jetstar and Tiger and the legacy full service high cost model of Qantas.

Godfrey said Virgin Blue always expected another low cost airline to enter the Australian market and saw its remaining in that territory as the real trap it escaped from in its early years.

He described a head on conflict between two low cost carriers like Jetstar and Tiger in a market the size of Australia as being like trench war fare.

“It’s a contest about who can lose the most money,” he said. “Our opportunities to make good margins are much better in the middle than at the extremities of low cost where there is no customer loyalty to anything but price.”

He also predicted that in the future the pure low cost carrier carriers typified by Ryanair would be seen as ‘legacy’ LCCs, clinging to a one size fits all formula that was vulnerable to the flexibility of low cost base higher quality products such as Virgin Blue’s new world carrier format concept, which would also experience change.

Looking further into the future, maybe 10 years, Godfrey saw the trend to trade liberalisation eventually lessen the sheltering of national airline brands by governments.

This could, and he stressed, hypothetically, lead to the likes of Singapore Airlines and Qantas merging. “I say tongue firmly in cheek, but do not dismiss the prospect of, Virgin Blue one day buying out Qantas….as the world becomes more accepting of free trade…and the value of regional consolidations and trade offs overcome the resistance to deals affecting national brands.”

Source: http://blogs.crikey.com.au/planetalk...ge-everything/

Virgin minds its Vs and Qs over its future
by Ben Sandilands
Thursday, 17 September 2009

Virgin Blue CEO Brett Godfrey said some provocative things about the Qantas dual brand strategy yesterday, but was it more than it appeared to be?

The occasion was a forward looking address to the National Aviation Press Club by Godfrey, the co-founder of the airline, who will retire late next year, not just as the head of a carrier that overcame the barriers to new entrant airlines in Australia, but ironically for a man running an ‘upstart’ operation, as the longest serving chief executive officer of a major national carrier this century.

Godfrey revealed there was an “airline of the future” unit at work in Virgin Blue, and that the day was coming when all of its brands, Blue, Pacific Blue and V Australia, would be united under one brand.

Not only would one “V” brand confront the dual brands of full service Qantas and no service Jetstar, but it would have a fully internet connected fleet, and every plane would offer the soon to be revealed and revised premium and discount products to every point it serves.

There would be no cheap brand versus “quality” brand like Qantas/Jetstar, just one brand, with low operational costs, doing all things for all people.

This is a major challenge to the Qantas dual brand strategy, and on the surface, exploits the intense dissatisfaction of Qantas customers crammed into Jetstar cabins as well as the internal tensions between the former, which Qantas staff claim is being gutted, to prop up the alleged “sweat shop” working conditions of the latter.

But why did Godfrey let this “secret” out? The media habitually transmits whatever signals airlines send to each without pausing to ask “why?” they were sent.

One theory that merits consideration is that the “V” team wants the “Q” team to panic into putting a premium economy offering in the Jetstar domestic fleet, because the former believe this will destroy whatever relevance the Qantas full service product has in domestic services now and in near future, to Virgin’s advantage, starting with the isolation of a once powerful brand to a core network of international routes.

Unfortunately, the Qantas response to Godfrey’s comments yesterday is not expected until its CEO, Alan Joyce, addresses the aviation media in November. Sooner would have been better.

By then Qantas low cost brand Jetstar will have flown headlong into month two of the incompletely announced expansion plans by rival Singapore Airlines controlled low cost clone, Tiger Airways, which Godfrey sees as trench warfare for disloyal price driven customers in which both combatants bleed cash to see who dies first.

This gets even more painful for Qantas if the widely held view that Virgin Blue domestic is profitable and Qantas main line domestic is unprofitable is correct.

Meanwhile Godfrey is refusing to release a video of his management team wearing grass skirts and singing the Qantas anthem “I still call Australia home.”

Revealing more of the Virgin Blue culture or irreverence, and “gatecrashing Qantas pricing monopolies” Godfrey said the taunts Joyce’s predecessor Geoff Dixon used to make about his airline were reproduced as motivational posters and badges and circulated among section or team leaders “with great and beneficial effect.”

“Our management team has been the one constant in the many twists and turns we have experienced under different ownership combinations,” Godfrey said.

“During that time … our board has changed so frequently we’ve had to issue name tags sometimes.

“We’ve been launched, listed, taken over, bought, sold again, pillaged, inherited, given away and now bought again last month. We had $300 million ripped out of the company…

“But we own 30 % of the market … and it is not unrealistic to say we will get half of it in time. In July our yields were down by only 1.8% but in Qantas they had plunged 12.3%.”

Where Qantas was shedding thousands of staff Virgin Blue had said it would have to lose 400 jobs, but only retrenched 12.

Godfrey said against such uncertainty in its ownership, and in the airline business at large, the airline had kept to its chosen path in the middle market which was where the biggest margins could be made.

But as everyone in the room, and the industry knows, he leaves next year, after a decade at Virgin Blue, and the management team will change no doubt as radically as its “airline of the future” unit sees its operations changing.

What will Qantas CEO Alan Joyce say when he takes the floor?

It could be two months before we find out.


Source: http://www.crikey.com.au/2009/09/17/...er-its-future/

[Jarden S]

A very interesting read thanks for posting them

[D Chan]

It is one thing to talk the talk but there are a lot of walking to do for Godfrey.
These sort of 'vision' trash talk mean very little, considering he may not be in his current role in 3 or 4 years time. In addition, looking into the crystal ball without consideration of external shocks and volatilities of the market is meaningless.

Here's a classic example - 3 years ago:
http://www.theaustralian.news.com.au...001942,00.html
In fact most of the 'vision' has not been realised because of management changes and most importantly external factors such as the global financial crisis.

What is interesting is the admission that they need to head to a single brand strategy. Perhaps a sign that the DJ group has lost some of its cost advantages when the product offering used to be simple.

I am interested to find out how efficient it is for VA to run a fleet of less than 10 77Ws. Correct me if I am wrong but to gain the most operating efficiency from any given fleet, especially widebodies, an airline needs about 10-20 aircraft in the fleet?

[lloyd fox]

D Chan

Godfrey is leaving at the end of next year.Already been announced.

The single brand may come earlier than everyone thinks.Check into when the Singapore-Virgin Atlantic deal regarding the non use of the virgin name on international routes ends ,and that may give you the answer ???

[Mike W]

Originally Posted by D Chan

It is one thing to talk the talk but there are a lot of walking to do for Godfrey.
These sort of 'vision' trash talk mean very little, considering he may not be in his current role in 3 or 4 years time. In addition, looking into the crystal ball without consideration of external shocks and volatilities of the market is meaningless.

You would have to say, despite a few hiccups on the way, that DJ have done bloody well in the past 9 years or so. Some help (Ansett demise) and some hindrance (QF doing everything possible to scuttle them including the formation of JQ - SARS, Global Financial Crisis and others).

I reckon Godfrey has done a sterling job with the company and I see no reason to believe that DJ will not continue to go from strength to strength.

The one Brand though is a no-brainer in my opinion. I hope it's Virgin Blue or Virgin Australia (the main reason V Australia is named as such?) depending on SQ's on-going involvement in VA i guess.

[Marty H]

Originally Posted by lloyd fox

D Chan

Godfrey is leaving at the end of next year.Already been announced.

The single brand may come earlier than everyone thinks.Check into when the Singapore-Virgin Atlantic deal regarding the non use of the virgin name on international routes ends ,and that may give you the answer ???

I think this is already evident with every new plane now arriving in Pacific Blue livery and the repaint of aircraft from VB to PB livery at present.

[Michael Morrison]

Originally Posted by D Chan

What is interesting is the admission that they need to head to a single brand strategy.

Unlike QANTAS who cmapin the 2 brand strategy, I don't believe DJ have ever really wanted to have multiple brands.... they have really been forced to use the Pacific Blue branding.... so it comes as no surprise that they want to have a single brand.

[Ash W]

The Virgin Blue/PB/V Aust model is a tad different to Qantas and Jetstar. The QF and JQ models are at complete opposite poles, so of course Qantas needs to keep them separate to make a differentiation. If they didn't it would dilute their main Qantas brand.

Virgin Blue on the other was forced to use different names for licensing reasons. For all purposes they are the same company with the same business model and product. V-Aust being a higher end product due to the market it competes in, but with the same core values as Virgin Blue.

One thing I don't like though is company CEO's sticking their noses into other companies businesses and telling them what they should do. They should just get on with the job of running their own company. Anytime I see one company **** canning another rather than selling the positives of their own brand I turn off. Indeed that is one thing I have always disliked about Virgin Atlantic and Virgin Blue and it is something that the likes of Branson play on constantly. You see it all the time in aviation and non aviation.

[lloyd fox]

Originally Posted by Marty H

I think this is already evident with every new plane now arriving in Pacific Blue livery and the repaint of aircraft from VB to PB livery at present.

No Marty that wont be the final name or livery.

It will have the Virgin name .Most likely Virgin Australia or Virgin Pacific.

[Michael Morrison]

The reason aircraft are being delivered in Pac Blue livery is for international expansion and reduction in domestic capacity.

In the last 12 mths they have expanded to Denpasar and heaps of new Trans Tasman routes....