Virgin Australia keeping powder dry on Hong Kong details

Virgin says it will operate A330s to Hong Kong. (Rob Finlayson)

Virgin Australia plans to lodge its application for a commercial alliance with Chinese shareholder HNA in the coming days with a view to starting nonstop flights to Hong Kong in “mid-2017”.

While the airline first raised the prospect of flying to Hong Kong as early as May 2016, there has been little detail about the nature of its proposed operations to North Asia beyond the fact the services would be mounted in partnership with HNA.

On Friday, the airline put a “mid-2017” start date for nonstop flights to Hong Kong from a yet-to-be-announced Australian city, and flagged a series of codeshares on HNA carriers’ flights between Australia and Hong Kong, Australia and China, as well as on the carriers’ domestic networks.

The tie-up would also involve reciprocal frequent flyer benefits and cooperation on route planning, sales, distribution and marketing, Virgin said.

The airline would seek interim approval from the Australian Competition and Consumer Commission (ACCC) as a first step, which would allow ticket sales to begin, ahead of a longer-term authorisation.

Virgin Australia chief executive John Borghetti said the application to the ACCC would highlight the domination of the Australia-Hong Kong market by two carriers – Cathay Pacific and his former employer Qantas.

And he estimated that the process to secure interim approval would take about four weeks.

“We are hopeful it will be very quick,” Borghetti told reporters during the company’s first half results presentation on Friday.

“The reason for that is that Hong Kong is really just a route that is covered by two carriers. Cathay and Qantas have got it by the throat and we intend to break that duopoly and bring real competition on the route.”

Virgin said it planned to serve Hong Kong with Airbus A330 aircraft. Borghetti said the airline had secured all the necessary takeoff and landing slots for its flights.

However, the airline has not confirmed the aircraft would come from its existing fleet of six A330-200s, which are predominantly used on trans-continental services from Perth to Australia’s east coast capitals.

Also, the A330-200 will begin flying Perth-Abu Dhabi three times a week from June 9.

Borghetti described the question of aircraft deployment for Hong Kong as “quite a complex tapestry” and declined to comment further, citing competitive reasons.

Any removal of A330-200s from the Perth route would represent something of a downgrade in the passenger experience for business class travellers, given the Airbus widebody features recently installed B/E Aerospace Super Diamond reverse herringbone seats with direct aisle access compared with standard business recliners on the Boeing 737-800.

Borghetti acknowledged this was a consideration when mulling over fleet options for the new Hong Kong service and the impact on flights between Perth and Australia’s east coast.

“Don’t assume that if we take an A330 from that route we haven’t taken into account what product will be available on the 737,” the Virgin chief executive said.

While Virgin’s announcement of May 2016 had also mentioned daily nonstop flights to Beijing would begin from June 1 – indeed the airline has secured the necessary traffic rights from Australia’s International Air Services Commission (IASC) – on Friday Virgin said it now planned to start those flights “in further stages of the agreement”.

And Borghetti raised the possibility that Beijing may not be Virgin’s first destination in China.

“Slots at Beijing and Shanghai and a lot of the what I would call Tier 1 Chinese cities are not easy to get and so it’s a balancing act between where you want to fly, where you can get the slots, how do you get the feed,” Borghetti said.

HNA Group owns or has partial stakes in 19 carriers, including Virgin.

Hainan Airlines is one of three HNA affiliated carriers that currently fly to Australia. A fourth, Tianjin Airlines, is due to start operations Down Under in September. (Sydney Airport)

Of those, Beijing Capital Airlines, Hainan Airlines and Hong Kong Airlines currently serve Australia with their own aircraft. A fourth, Tianjin Airlines, was scheduled to begin nonstop flights between Melbourne and Chongqing in September 2017.

Currently, Virgin places its VA airline code on Singapore Airlines (SIA) and SilkAir services from Australia to Hong Kong and numerous points in China via Singapore. SIA/SilkAir and Virgin have an extensive alliance and frequent flyer agreement that was extended for a further five years in 2016. SIA is also one of Virgin’s major shareholders.

Borghetti said there would be no impact from the proposed alliance with HNA on Virgin’s arrangements with Singapore Airlines and SilkAir.

Comments

  1. Kim says

    MMM where from what a silly question

    First Sydney then Melbourne then Queensland all places that have multiple airlines already
    How about going where there not multiple airlines already
    But better still how about opening up new place not serviced or where there are limited services ,Now that would be a first for an Australian airline instead of always being the follower

  2. Ian Morris says

    Kim, logic would suggest that Perth would be the Australian origin for the flights to HKG on the basis that Cathay is the only carrier on the route right now with its 10 flights a week. Load factors on Cathay seem to be pretty good too based upon the flights I have taken. It would also tie in with the new AUH flights from PER. However, logic is not something that I would normally associate with either of our two main carriers.

  3. Baxter says

    I agree with Kim, how about our airlines try something new. Stop copying each other and try create new markets. Darwin, Sunshine Coast, Broome, port Hedland, Hobart, Canberra, Townsville. All have zero competition on this route and limited connections to Hong Kong. Or even develop a domestic airport into an international one. Surely Alice Springs or Uluru could be a interesting market for the Chinese tourism boom

  4. Aden O'Keefe-Buckton says

    Like CBR for example (@Kim)

    No competition and fairly decent demand with connections further into China

  5. Karen Lasouu says

    I think it will be from Sydney, Brisbane but why haven’t any airlines thought of starting a direct route to HK from Sunshine coast, gold coast, darwin, Hobart, Newcastle, Adelaide or Ballina-it will be very successful since there is no competition!

  6. Not so Sharp Sharp? says

    And when China suffers economically or they start becoming even more belligerent with the South China Sea, then what?

    Another short term VA move with HNA behind the scenes. Hopefully it works out but any disagreement will see VA bent over a barrel by the Chinese.

  7. Will says

    All valid points guys, our aussie carriers are busy playing follow the leader and too scared to change the rules. The only problem is that they are all sheep and just going around in circles getting nothing done.

  8. Hutch says

    Whilst it easy to pick an unserved city on a map and say fly from there, no one seems to actually understand the importance of yield. Being a monopoly on a route where there is a small population base, minimal freight, poor connections, poor infrastructure and minimal business traffic does not mean your flight will be profitable.

    The reality is Hong Kong is a slot constrained airport. If VA manages to get slots into Hong Kong, common sense and economics would suggest they operate there from a large Australian airport, where they have good feed from Australia’s largest population base (the east coast) and can obtain appropriate yield. This is before considering HNA would want Virgin to operate to SYD or MEL as HNA don’t have capacity to operate there,

  9. Will says

    You clearly didn’t read our posts about Adelaide Hutch… Poor infrastructure? Seriously, your comment about Adelaide is completely unfounded an incorrect so I’ll put it too you simply. There is freight demand in Adelaide with key exports growing and tourism booming in South Australia, Adelaide Airport has some of the most up to date and revolutionary infrastructure in place for it to win numerous awards since 2005. So next time you make a comment get your facts straight without assuming. Cheers

  10. Hutch says

    Thanks Will, good to see the power is back on in SA 😘

    Whilst great to see your passion for SA, perhaps it taint’s your opinion. And yes, ive been to ADL and it was lovely, but clearly i can’t make a single response that covers every aspect for every port mentioned… nor did I specify Adelaide and nor do I see your post about Adelaide.

    What international lounge option exists for passengers in Adelaide for example? Economically, how does SA stack up compared to NSW or SYD (I’d suggest that Western Sydney has a bigger economy alone). I note the competing airline on this route, Cathay only operates to 5 weekly (increased for 4), if demand is so strong why aren’t they flying there more. VA’s domestic connections are be pretty reasonable at ADL, but better than MEL?

    As always, happy for some discussion. But I don’t live in MEL or SYD, so my opinion is not based on personal gain. Just that if my armchair airline was planning on launching a route to a new city, I’d want it to be between two large strong cities with the economies to support good yield.

    BTW, awards are great, but Adelaide (and no Australian airport) is Changi. When an Aussie airport reaches those heights, I’ll think they’re really award worthy.

  11. Dee Thom says

    Well amp would work probably three times a week, but any A330 landing at MCY would end up a static display during the next few years.

  12. franz chong says

    Ex ADL could well work.Not all of us want the hassles of Flying SQ via Singapore or using Qantas through Sydney or Melbourne and some of us in the past have had terrible experiences with Cathay Pacific.time the flights right and you’ll be onto a winner.CX is great if continuing onwards to Beijing and other parts of China or to Japan,Vietnam or even Vancouver for the South Aussie Market but the schedules are otherwise poor.