This airline is facing the ultimate makeover test
It shed the irreverent, slightly scrubber clothes it wore as Virgin Blue more than a decade ago as it sought to become a full-service, multi-brand airline group under former chief executive John Borghetti. That was its Qantas mini-me period.
Loading
In a financial sense, the period in which it sought to clone Qantas was a speculator failure.
For its shareholders, which were mainly large offshore airlines, Virgin was a financial black hole that suffered a string of losses. In the early months of the COVID-19 pandemic, it lost the support of financiers and shareholders and collapsed under a mountain of debt and a pandemic-induced revenue stasis.
But Borghetti's reign also marked the heyday period for Australia's flying public.
He invested millions into Virgin's product – its aircraft, its food, loyalty scheme and its lounges. At one stage, travellers were fed feasts devised by celebrity chef Luke Mangan and could fly some domestic business class routes on a full lie-down seat.
It also forced Qantas to lift its service game in what became a service race to the top. This market-share war also led to a price war – a dream for customers who received peak service levels with discount airfare prices.
But it was unsustainable.
Under Bain's ownership, yet another version of Virgin was crafted, which could or should be its Goldilocks market position.
Arguably, it does retain some of the disruptor/challenger original DNA and some of the premium features it grew under Borghetti.
Loading
It will compete with Qantas and with low-cost carrier Jetstar, but its strategy is to commandeer the middle – the more cost-conscious small- and medium-sized business market and the higher-end leisure traveller. It will do so by pitching its pricing a bit below Qantas mainline, but above Jetstar.
The recovery in its earnings over the past two years suggests this strategy should be a winner.
Australia has demonstrated it can support two airlines (and three differently pitched airline brands) as long as none of them does anything to disrupt the status quo.
But there is a large aviation graveyard full of those that attempted to introduce a third national airline.
The Virgin prospectus (which is the float sales document) says that Australia is a structurally attractive market because of large distances between capital cities and the lack of a fast and efficient train network. You can add to that a wealthy population that has prioritised travel even in the face of a cost-of-living crisis and high interest rates.
The secret to Virgin's success going forward will be to know its place in the market and not lose sight of it.
Beyond that, Virgin, like any airline needs a good smattering of luck – given the fact that black swan events can blow up the best-laid plans.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Sydney Morning Herald
4 hours ago
- Sydney Morning Herald
This airline is facing the ultimate makeover test
Virgin Australia has completed one of the largest corporate makeovers in Australian history. From bankruptcy five years ago, in a few weeks, investors large and small will get an opportunity to punt on its shares – to decide whether this is a quality reno or one with just a lick of paint and floorboard polishing. The vendors, private equity outfit Bain, will be handsomely rewarded, as will a handful of its senior management who could pocket tens of millions of dollars if the airline's hockey stick earnings forecasts are met. But what about the new band of shareholders who have been offered shares in the new public listing, or those who are thinking of buying into Virgin after it lists at the end of the month? Loading Investing in aviation has a long history of being at the riskier end of the spectrum. Airlines are especially sensitive to black swan events such as COVID-19 or 9/11, but they are also susceptible to changing industry dynamics such as new entrants, disruption in market share, or the health of the economy. In the 25 years since its launch as the cheeky disruptor airline funded by Richard Branson, Virgin Blue has had many corporate faces – not all of them attractive in an earnings sense. In a financial sense, the period in which it sought to clone Qantas was a speculator failure. But the common theme has been its position as a challenger to Australia's aviation queen – Qantas. Virgin Blue was born in 2000 as a low-cost airline that carved out a new market, tapping into price-sensitive leisure customers who could not afford to fly Qantas or its then-rival Ansett, which collapsed the following year.
The Age
4 hours ago
- The Age
This airline is facing the ultimate makeover test
It shed the irreverent, slightly scrubber clothes it wore as Virgin Blue more than a decade ago as it sought to become a full-service, multi-brand airline group under former chief executive John Borghetti. That was its Qantas mini-me period. Loading In a financial sense, the period in which it sought to clone Qantas was a speculator failure. For its shareholders, which were mainly large offshore airlines, Virgin was a financial black hole that suffered a string of losses. In the early months of the COVID-19 pandemic, it lost the support of financiers and shareholders and collapsed under a mountain of debt and a pandemic-induced revenue stasis. But Borghetti's reign also marked the heyday period for Australia's flying public. He invested millions into Virgin's product – its aircraft, its food, loyalty scheme and its lounges. At one stage, travellers were fed feasts devised by celebrity chef Luke Mangan and could fly some domestic business class routes on a full lie-down seat. It also forced Qantas to lift its service game in what became a service race to the top. This market-share war also led to a price war – a dream for customers who received peak service levels with discount airfare prices. But it was unsustainable. Under Bain's ownership, yet another version of Virgin was crafted, which could or should be its Goldilocks market position. Arguably, it does retain some of the disruptor/challenger original DNA and some of the premium features it grew under Borghetti. Loading It will compete with Qantas and with low-cost carrier Jetstar, but its strategy is to commandeer the middle – the more cost-conscious small- and medium-sized business market and the higher-end leisure traveller. It will do so by pitching its pricing a bit below Qantas mainline, but above Jetstar. The recovery in its earnings over the past two years suggests this strategy should be a winner. Australia has demonstrated it can support two airlines (and three differently pitched airline brands) as long as none of them does anything to disrupt the status quo. But there is a large aviation graveyard full of those that attempted to introduce a third national airline. The Virgin prospectus (which is the float sales document) says that Australia is a structurally attractive market because of large distances between capital cities and the lack of a fast and efficient train network. You can add to that a wealthy population that has prioritised travel even in the face of a cost-of-living crisis and high interest rates. The secret to Virgin's success going forward will be to know its place in the market and not lose sight of it. Beyond that, Virgin, like any airline needs a good smattering of luck – given the fact that black swan events can blow up the best-laid plans.
Sydney Morning Herald
9 hours ago
- Sydney Morning Herald
‘Buyers aren't mucking around': Cottage sets price record at lightning-fast auction
'They bought this one in 2013 and paid just $450,000. But now, with interest rates coming down, we can expect to see more of this energy. Buyers aren't mucking around.' Smith said most of the bidders were first and second-home buyers, with the house getting 125 inquiries and more than 40,000 digital views throughout the campaign. He added that the home's entry-level sweet spot and proximity to Stones Corner and its popular cafes made it a buyer magnet. The home was one of 145 scheduled auctions across Brisbane over the past week. By Saturday evening, Domain Group recorded a preliminary auction clearance rate of 42 per cent from 112 reported results, while 26 auctions were withdrawn. Over in Kenmore, a last-second bidding twist rewrote the end of an already-heated auction. The meticulously renovated home at 15 Rothesay Street sits on a 764-square-metre block and boasts dual living – attracting eight registered bidders, of which two were active. Bidding opened at $1.6 million with the two parties offering up $25,000 and then $5000 bids, until the auction paused at $1.9 million. It was then that selling agent Deron Wang, of Brisbane Real Estate, secured $1.92 million from the lead bidder on a 30-day settlement – which the vendors accepted. But just as the hammer was about to fall the underbidders swooped back in. 'They said: 'I'll give you $2 million if you give me a 120-day settlement',' Wang said. 'The owner immediately said yes, I mean, it was a no-brainer. Then the other bidder countered with a $1000 bid and the underbidder topped it again.' The home sold for $2,002,000. 'We didn't even see this kind of thing during COVID frenzy,' Wang said. 'The vendors were so stoked, they had agreed to $1.92 million and were ready to celebrate.' Wang said the winning buyer, an owner-occupier from Wishart, needed the longer settlement to sell their existing home. He added that most buyer interest for the home came from families in their 30s to 50s. In Kedron, a cheekily marketed home boasting 'dead quiet neighbours' due to its cemetery backdrop sold under the hammer for $2.2 million after a bidding duel between two buyers. The five-bedroom, three-bathroom residence at 5 Bloxsom Street sits on a 683-square-metre block and was newly built over the past eight months, featuring two levels, 5.6-metre ceilings, a pool and a luxe master suite. Selling agent Caleb Mayberry of Ray White said the vendor – a first-time developer – bought the block in 2014 and only last year decided to knock down the original home and build a bespoke family residence. 'I got to work closely with him on the design. He wanted to create something that ticked every box – and the feedback throughout the campaign was incredible,' Mayberry said. 'Buyers weren't put off at all by the cemetery. They instead viewed it as an opportunity to buy well as the location gave it that element of affordability. 'And it meant you had dead quiet neighbours.' Bidding kicked off at $1.5 million and moved quickly before the home sold bang on the reserve. Mayberry said the street was tightly held and popular with families due to its proximity to schools. AMP Capital chief economist Shane Oliver said Brisbane's property market was holding steady, with interest rate cuts adding fuel.
