Virgin Australia: Changes to airline set to shake up Aussie industry

Virgin Australia’s full-service offering may be replaced by a ‘pay by row’ model adapted by Boston-based airline,JetBlue, an aviation expert warns.

On Thursday, Virgin Australia’s chief executive Paul Scurrah announced he would be standing down as the airline’s top dog. He will be replaced by former Jetstar boss Jayne Hrdlicka in early November, when Bain takes full control of the airline from administrator Deloitte.

Mr Scurrah, the popular boss who steered the company through its most challenging year during COVID-19, announced he would be stepping down amid rumours of a clash with Virgin’s new owner Bain Capital over the future direction of the airline.

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Virgin Australia CEO Paul Scurrah resigned on Thursday. Picture: Lyndon MechielsenSource:News Corp Australia

Jayne Hrdlicka with be the new Chief Executive Officer of Virgin Australia. Picture: Hollie Adams/The AustralianSource:News Corp Australia

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There are fears the new US-owner plans to transform the airline into middle-ground carrier, with services sitting between what Qantas has to offer and the low-fares offered by Jetstar.

Speaking to, aviation expert Neil Hansford said he expects the new owners of Virgin Australia to adopt a similar business model to US airline JetBlue.

The US-based carrier, which is the seventh largest airline in the United States by passengers carried, has focused on a domestic presence rather than dipping into international routes. Their model offers low cost fares and a unique ‘pay by row’ model.

The airline’s success in the US has been its cost advantage over its peers and generating industry leading margins, a dominance that’s been held in Australia by budget-airline Jetstar.

“JetBlue is an A320 operation in the US that uses a model whereby the consumer will buy a ticket to ride, then buy their seat,” Mr Hansford explained.

“Depending on what seat the customer picks will determine how much they’ll pay. There will still be business class. but when you’re in economy, each seat will come with a price. So if you’re two thirds down the plane in a middle seat in economy, it will be cheaper than someone in the aisle or the second row of economy.

“This model means every single seat will have a price.”

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Aviation expert Neil Hansford says Virgin Australia could adopt a similar model to US low-cost airline, JetBlue. Picture: NCA NewsWire / Christian GillesSource:News Corp Australia

JetBlue is a is a major American low cost airline, and the seventh largest airline in the United States by passengers carried.Source:AP

Mr Scurrah’s post-administration vision for Virgin Australia was to keep it operating as a full-service airline, complete with business class and lounges, but with a more streamlined structure and heavily reduced cost base.

Bain committed to that vision in its bid to buy the airline, but trade unions now fear it will change plans and take it down a budget route instead.

“We think they’re going down a budget path, and Paul doesn’t have budget carrier experience,” a senior management source told Nine newspapers.

Ms Hrdlicka, meanwhile, does — the Tennis Australia president and former A2 Milk boss was group chief executive officer at Jetstar between 2012 and 2018.

Mr Hansford said that the airline will still have a premium offering, because Ms Hrdlicka “will be well aware” it’s the only way for an airline to make money.

“The only way you make money domestically or internationally is a decent premium component for the poor yields in economy,” he said.

“If Virgin does settle in to a JetBlue model, it is something that is workable in the US and will work here because the consumer in the US is the same as here. I also think catering and entertainment will stay, but may change the amount of luggage that’s included because in domestic travel, how often do you actually need 23kg”.

Virgin Australia went into administration in April 2020. Picture: Lyndon MechielsenSource:News Corp Australia

Mr Hansford cast doubt on Virgin Australia re-entering the international market, but predicts the stripped back carrier will consider routes between New Zealand, some Bali travel paths, Fiji and possibly Samoa.

“Bain will want to steer into a new niche,” he said.

“To take Qantas or Jetstar on you have to be brave … so they will fall between those two in price. With all the unemployment, price for Australian travellers will be important until 2023.

“So if people want to get best value fares, they will need to change the way they fly. So don’t go looking for fares on a Monday or a Friday morning … look for Tuesday afternoon or a Thursday morning.”

In a statement, however, Deloitte administrator Vaughan Strawbridge said he believed Bain would not turn Australia’s second airline into a low-cost carrier.

“I know there has been speculation about the shape of the airline into the future, and I have reaffirmed with Bain Capital that Virgin Australia will not be repositioned as a low-cost carrier,” Mr Strawbridge said.

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

“This will appeal to the full spectrum of travellers, from premium corporate through to more budget-focused customers.”

Deloitte administrator Vaughan Strawbridge said he believed Bain would not turn Australia’s second airline into a low-cost carrier. Picture: NCA NewsWire / Christian GillesSource:News Corp Australia

Unions are concerned about what the leadership change means for the future of the airline and whether jobs will be kept if it goes low-cost.

They are now seeking an answer from Bain about whether it would honour the commitments outlined in its bid to buy the airline, which won the support of Virgin’s creditors last month.

“The assurance given to 6000 Virgin employees that their jobs would be safe was based on commitments made by Bain during the sale process to remain a full-service airline,” Australian Services Union Assistant National Secretary Emeline Gaske said.

“If Bain starts to unwind these commitments and move towards a model of a low-cost carrier, this raises very significant concerns about job security for Virgin workers.

“We call on Bain Capital to honour their commitments to Virgin employees for a full service airline and to continue negotiations with unions in good faith.”

But Mr Hansford said the writing is on the wall, and you only have to look at the airline’s aircraft fleet compared to their number of employees to see more jobs will hit the chopping block.

The future business model of Virgin Australia remains uncertain. Picture: NCA Newswire / Gaye GerardSource:News Corp Australia

“Virgin Australia has committed to 56 planes … you don't need 6000 staff to fly 56 aircraft,” he said.

“I think it will be lucky to see 5000 jobs survive.”

The Transport Workers Union (TWU) suspended enterprise bargaining talks with Virgin Australia on Wednesday afternoon, following days of rumours about Mr Scurrah’s future with the company.

“The statement (about Mr Scurrah’s resignation) makes no mention of previous commitments to regional routes, the international division, 6000 jobs or fleet numbers,” TWU National Secretary Michael Kaine said.

“We are seeking a meeting with Bain Capital to discuss these issues and our delegates will decide in the coming days about the future of industrial talks with the airline.

“We sincerely hope that the veil of secrecy and background shenanigans on display over the past few days is not repeated. Trust must be at the heart of Bain’s dealings.”

with Lauren McMah

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