A revamped Virgin Australia will target the “mid-market”, and there will be no nasty changes to the airline’s Velocity Frequent Flyer program for its 10 million members.
- Virgin Australia is reviewing its in-flight offerings and services including WiFi and entertainment
- The airline will close several airport lounges including in Darwin, Cairns and Mackay
- The hope is that the airline will emerge as a competitive mid-tier player
Jayne Hrdlicka, who started in the role of Virgin Australia Group chief executive on Wednesday, has launched a strategic review of the airline’s business class offering as well as its in-flight WiFi and entertainment.
It will close lounges in Darwin, Cairns and Mackay, with the Canberra facility still under review.
And the airline is also reviewing the number of domestic and regional services on offer, with further changes possible once travel bans and state border closures ease.
On Tuesday, Virgin Australia seized the opportunity to be a privately-listed company when the $3.5 billion sale of the Virgin Australia Group, with the shares and the entire business of the airline transferred to Bain Capital, was completed .
Billionaire Richard Branson’s Virgin Group has taken 5 per cent stake in the new Virgin Australia, making it the second biggest shareholder in the Australian airline after Bain.
“I’m delighted that Virgin Australia is ready for take-off once more, soaring out of administration, with a clear future direction to fly towards,” Mr Branson said in a statement.
“We’re very optimistic about the future and enormously proud of all of the Virgin Australia team.”
Virgin Group chief executive Josh Bayliss said Bain had been a long-term partner on Virgin Voyages.
“Led by Jayne Hrdlicka, we are confident that Virgin Australia’s focus on enabling its incredible people to provide an outstanding service for customers will see the airline provide strong competition to Qantas and an exceptional experience for flyers,” he said.
Ms Hrdlicka said while the revamped airline would serve all segments of the market, it would build its proposition around its long-standing and most loyal guests.
These, she said, include price-conscious corporate travellers, small to medium businesses, premium leisure travellers and holidaymakers.
“Virgin Australia will be a mid-market carrier appealing to customers who are after a great value airfare and better service.”
Travellers hungry for value
The company had previously revealed plans to make about a third of its workforce redundant, with about 3,000 jobs expected to go.
Around 6,000 staff will remain.
Bain Capital’s plan for the airline has also seen the end of the Tiger Australia brand, but the company will retain the air operator certificate so it can revive a low-cost carrier when the domestic holiday travel market fully recovers from the pandemic.
A key part of Bain’s plan is to operate an all-Boeing 737 mainline fleet, with other aircraft types restricted to regional routes and charters.
The airline has been through many changes since it debuted in 2000 as Virgin Blue, under a low-cost carrier model.
More premium offerings including lounges and a frequent flyer program followed.
Under former CEO John Borghetti, a rebranded Virgin Australia went head-to-head with Qantas in 2011 as a “full service” airline.
Ms Hrdlicka said the travel environment was changing and so were customers’ preferences.
“They are hungry for flexibility and choice, a trusted brand that resonates with their values, and great prices, along with the premium features they value most.
“We’ve announced a plan that will ultimately give our customers what they value without the big price tag: premium lounges, a new and fresh retail offering onboard, a choice of cabins, better digital technology and a more streamlined check-in experience.”
Some lounges reopen, but The Club lounges could go
Although some of Virgin Australia’s airport lounges reopened on Wednesday, the airline will shut others around the country.
Due to low visitation, the Darwin, Cairns and Mackay lounges will close, and the Canberra lounge remains under review.
Lounge memberships that expired during the COVID-19 period will be extended for 12 months from the original expiry date.
Initially, lounges will offer guests an interim food and beverage menu, which will be reviewed as the lounge network gradually reopens and passenger volumes return.
A new-look Virgin Australia Lounge will open in Adelaide in early 2021, with upgrades to others expected in the future.
John Borghetti was behind the creation of an invitation-only high-end lounge, The Club, as a challenge to Qantas’s Chairman’s Lounge.
Ms Hrdlicka said they had not yet made a decision on whether to keep or ditch The Club lounges, which are still closed.
“We’re going to wait and spend some time with our guests to figure out exactly what role it’s going to play and what makes sense in a post-COVID world,” she said.
Ms Hrdlicka said she had spent the past three weeks meeting about 300 Virgin staff, as well as doing a live video interactive session with more than 1000 people, and said that many felt frustrated their brand had lost authenticity.
“The thing that surprised me most was the clarity everyone has on the problems of the past,” she said.
“They’ve seen a decade of decisions made that didn’t feel quite right to them. A lot of cost being invested in the business.”
Three tiers of in-flight seating, but no free food
Seating on flights will be three-tiered — business, economy x (extra leg room) and economy.
“At this stage there’s no intended change to the one checked bag for free,” she said, but hinted there may be changes for business customers who have greater luggage allowances.
Ms Hrdlicka said the logic behind the strategy to focus on being mid-tier was based on customer data.
“What we’re known for is delivering great value,” she said.
“We’re playing to travellers who want to have a great experience but don’t want to spend a lot of money for it.
“They like having the lounges, they like having the choice of seating in terms of leg room and are prepared to pay a bit more for that extra leg room.”
Economy customers will be made to pay for in-flight snacks (all customers will still get complimentary tea, coffee and water).
A buy-onboard menu will replace the existing snack menu early next year.
But Ms Hrdlicka said they’d learned from the two-minute noodle incident, and would be giving business class customers proper food.
There was a social media storm in mid-October when photos were posted of Virgin Australia serving two-minute noodles to its business class customers – and they will have revamped menu once the review is over.
Business class to be relaunched by 2021
The company will undertake a review of its business class offering before relaunching it in 2021. The review is being done in collaboration with the airline’s crew.
In-flight WiFi and entertainment remains under review, with more details to be announced next year.
Ms Hrdlicka says they will definitely keep and improve business class, but hints that in-flight wifi and entertainment could go.
“We just need to work through with the travelling public to figure out whether or not its worth keeping,” she said.
“With entertainment, we have not yet landed on what’s the right experience, given the increasing trend towards bringing your own device.”
There will be a new self-service and assisted check-in, and baggage drop facilities will open at many airports.
Ms Hrdlicka hopes to use technology to give people a more personalised service, and through the airport to their gate and flight, more quicky and easily.
Virgin Australia will also update its app to give its Velocity Frequent Flyer members a more personalised travel experience and one single gateway to engage with the airline and Velocity.
But once domestic travel resumes, don’t expect all flights to be back.
The company is reviewing domestic and regional destinations and restructuring Virgin Australia Regional Airlines.
But Ms Hrdlicka said once international travel resumes, she expects they will partner again with the same overseas airlines as they always have.
Working with Qantas boss Alan Joyce to lobby Government
Ms Hrdlicka said she and Qantas boss Alan Joyce had been working closely over the past few weeks in asking government for travel restrictions to ease and state borders to reopen.
“We have an aligned interest in trying to get the industry back on its feet,” she said.
Mr Joyce has said he doesn’t think international travel will resume until mid next year by the earliest.
Ms Hrdlicka doesn’t dispute that, but says: “I wish I had a crystal ball. What we’ve all learned over the course of five months or so, is just when things like they are going to get a lot better, they don’t — in fact, they can get worse.”
But she says that’s why its crucial the Government (she says she has a good relationship with ministers including Treasurer Josh Frydenberg) provides a national framework for managing domestic borders and international travellers “in a way that doesn’t requite 14 days locked up in hotel room”.
Aside from government, the other key stakeholder she needs to get on side is the unions.
The big fear of the the unions is that Ms Hrdlicka will adopt a hard line at the company on staff conditions and wages , based on their perception of her in her previous role as Jetstar CEO and before that as a senior executive for the Qantas Group.
She says she is working “collaboratively and constructively” with the unions “to ensure we have the flexibility and the cost structure to navigate the huge uncertainty that’s in front of us”.
“And this is critical to our future success at a time in the industry where you have to plan for the worst and hope for the best.”
Meeting the diversity challenge
Ms Hrdlicka is the first woman ever to lead Virgin Australia, and her approach will likely differ to her predecessors Paul Scurrah and John Borgehtti in part because of that.
She doesn’t fault either of them, but says her personal style is “collaborative”.
“For example, I don’t have an office, I sit out in an open plan space with everyone else.”
A major focus for her will be ensuring greater diversity throughout the business.
“And it takes a special grit and determination and resilience to be at the top of any business, particularly as a woman in corporate Australia.
“Those characteristics are actually perfect for right now in aviation.”
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