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Virgin boss calls for support for competitive airline market

A competitive aviation industry is vital for all players and Virgin Australia Group chief executive Paul Scurrah says he is focused on securing a strong future for Australia’s second biggest airline.

But he has called on people who say they support the need for a strong, profitable second carrier to use their influence to ensure Virgin gets the support it deserves.

Speaking on the sidelines of the Australian Airports Association annual conference on the Gold Coast, Scurrah said predecessor John Borghetti had delivered “an amazing product” and should be celebrated for making sure there was competition across all sectors of Australia’s airline industry.

He said Virgin was in the position to have a fighting chance because of that.

“For us it is incredibly important that people who verbally support the need for a strong, profitable second carrier actually utilise their influence to ensure that we get the commensurate support that we should get,” he said.

The Virgin boss said recent talks with state governments concerned about Virgin’s withdrawal from certain routes had included contentious discussions about the fact Virgin did not enjoy its natural capacity share of government spending on air travel.

“If they’re serious about wanting us to succeed then I think that’s the least we should expect,” he said.

“And when you take into account the fact that all governments have a lowest fare of the day or a lowest logical airfare policy and that we are consistently cheaper than our competitor then we should be getting more than our natural share.”

Profitability is one of the key goals of a sweeping review of the business Scurrah launched when he took the top spot at the Virgin Australia Group.

He has already announced the axing of 750 jobs as he streamlines the business as well as a 2 per cent reduction in capacity and the removal of five aircraft from the group’s fleet.

He also announced a delay in the delivery of new Boeing 737 MAX aircraft and a decision to buy back a 35 per cent stake in the Velocity frequent flyer program.

“I’ll say from the outset: we run a strong airline, with an excellent safety record, great people, and exceptional customer experience,” he had earlier told AAA delegates.

“We provide very important competition in Australia and ensure our market is not a monopoly.

“However, I’ve made no secret of the need to improve the financial performance of the group and return it to profitability.”

Although not prepared to telegraph detailed plans stemming from the review, Scurrah said other goals included delivering for customers and ensuring our operations are more sustainable.

He said the focus was moving away from market share, revenue growth and network growth towards profit, cashflow generation and return on investment.

There was also a renewed focus on major profit generators Velocity and the group’s domestic operations.

However, the Virgin chief emphasised that this did not mean Virgin would be taking its eye of the ball in the corporate market.

“We will continue to focus on it and compete in it,” he said.

“However, we will continue to have a very strong focus on the important leisure market in this country as well.

“We’ll do this through a balance of premium and low-cost products – making sure we put them on the right routes to attract the right market segments.

“We are focusing Virgin Australia towards routes that have both a strong business and leisure orientation, and Tigerair on leisure destinations. These products, of course, will continue to have competitive prices.”

Changes at Velocity would mean moving from an emphasis on acquiring members to one focused on improving engagement and earnings, Scurrah said.

He said the domestic business would be supported by low-cost offshoot Tigerair Australia and international flying.

“And for all of the experts who were predicting what we were going to do, I am sorry to say we will not be closing either of those down,’’ he told the conference. “They will be a big part of our future for many, many years to come.”

Passengers would also see a number “of subtle but important changes” such as the way they were greeted as the airline pursued its goal of providing a “feel-good” flying experience and underscored its reputation for customer service.

“Throughout our review, one thing we heard loud and clear from our customers is that they want us to be more relaxed,” Scurrah told the conference.

“We took that on board. So, this month, we changed our inflight announcements.

“Now, instead of saying ‘good morning ladies and gentlemen’, we now say ‘hi everyone’. We now encourage our crew to call customers by their first name.”

Asked about the airline’s plans for regional Australia, Scurrah said it was hard to make money on regional routes and many, although not all, were sustained by government subsidies.

“So we are reviewing what we do regionally right now to see whether we need a stronger partnership with some of the existing regional carriers or whether we look at our fleet and see if there’s a better way of deploying some of those aircraft on those routes,” he said, adding the airline hadn’t yet  decided where it was going with regional operations.

Scurrah also addressed the “flight shame” movement gaining traction in Europe.

“The aviation industry can’t hide the fact that it is a big contributor to carbon emissions. But we need to be proactive about finding solutions,” he said.

“Given the importance of aviation in connecting people, given its importance to our economy, we have a responsibility to ensure it is sustainable.”

He said Virgin Australia’s current commitment to emissions reduction was in line with the International Air Transport Association’s goals of carbon neutral growth from 2020 and a 50 per cent reduction in emissions by 2050.

Work already done included carbon offset programs at Virgin Australia and Tigerair that had saved 550,00 tonnes of carbon, the introduction of “scimitar” winglets saving 160,000 kilograms per aircraft per year and a fuel efficiency program that produced a 28,000-tonnes per year reduction.

Single-use plastic was another area Virgin was addressing after announcing the removal of plastic straws and stirrers in 2018 and the transformation of inflight products such as coffee cups with more sustainable materials.

However, Scurrah noted carbon offsetting was only a part of the solution.

“And if you’re relying on carbon offsetting to be your story, it’s a cop out as an airline and you’ve got to do all the other things we’re doing,” he said.

“We will do a lot more than we’re currently doing and that’s all I can say right now without ruining the whole announcement.”

By Steve Creedy


About Steve Creedy

An award-winning journalist, Steve began covering aviation in the United States in the early nineties before returning to Australia later that decade and editing The Australian’s aviation section for 17 years. He is editor of Airline Ratings and has co-authored books on industry initiatives aimed at reducing greenhouse emissions.

Steve has joined the AAA to write interesting and informative editorial on the aviation industry.

 

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