Catching The Bus

The A330 decision is telling, and one of the most obvious early signs of Virgin Blue’s new business and premium traffic focus. These two leased aircraft – reportedly ex Emirates machines – will enter service next May on transcontinental routes to Perth. VB is not saying which ports on the east coast they will operate from, but presumably they will fly from Sydney and Melbourne, where they would go head to head with the two new A330-200s Qantas is now operating on these routes.

Those two Qantas aircraft (VB-EBM and EBN) also provide a pretty good clue as to the kind of product offering VB may be planning. They offer what is perhaps the best world’s domestic airline product, with 36 business class seats set at a very comfortable six abreast (as opposed to the more typical seven abreast), with a width of 22in (56cm), plus 265 economy class seats. Just as significantly, they are also the first Qantas domestic aircraft to offer inseat IFE with audio and video on demand (using Panasonic’s eX2 system, as fitted to Qantas’s A380s), plus individual USB ports and PC power (shared in economy).

That’s a pretty impressive product offering that Virgin Blue needs to beat to offer a point of difference over Qantas, which has long been dominant in the corporate travel market.

But it is also a configuration that if Virgin Blue at least meets or beats could be deployed on short haul international services. For long haul services that really take advantage of the A330-200’s 6750nm class range some sort of business class sleeper seat is really called for (and for which Qantas has Skybed equipped international configuration A330-200s), but for shorter sector international flights, say Perth-Singapore or a Sydney- Auckland, a very comfortable domestic configuration would be well suited.

And it is highly unlikely the VB A330 fleet will remain at two units – it is generally accepted that a minimum fleet of 12 or 13 aircraft is needed from an efficiency standpoint.

Further A330s would allow VB to put the widebody on the Sydney-Melbourne-Brisbane trunk route triangle (although there are gate restrictions with accommodating the A330’s 60m wingspan at Sydney’s Terminal 2). And it is easy to see long haul configured A330-200s used to fly into Asia to connect with a future Asian airline alliance partner, given Asia is the obvious gap in Virgin’s international network after announcing its Etihad tie-up.

What remains to be seen though is if the A330 is a fixture in the VB fleet plan, or an interim stop gap long term pending a 787 order, even if CEO Borghetti did pour cold water on a 787 or A350 buy (the latter presumably much too big for domestic operations) at the airline’s annual results press conference. But certainly leasing at least the initial two A330s gives VB some flexibility to go down either path.

Meanwhile, at the small end of the Virgin Blue fleet scale, the decision to dispose of the 78-seat E-170s is similarly telling, although what it means for the airline’s strategy is a little less clear (the larger 104-seat E-190s will stay). Borghetti said that while the E-170 is a great aircraft, it is just not suited to the routes VB has deployed them on, but what does the decision mean for the all-important Sydney- Canberra run, where frequency is king, and for regional routes such as Sydney-Albury? Given the importance of the Sydney-Canberra route for corporate accounts, and that Virgin Blue has said it won’t withdraw from regional routes it currently serves with the E-170, that suggests one of two things – the acquisition of a turboprop, or an alliance with an existing regional operator. Given Virgin Blue’s new alliance strategy (even if it is off to a rocky start – see Contrails this issue), and that VB has been known to have looked at turboprops quite seriously in the past, either seems a realistic option.

Or even both. Regional Express/Rex is an obvious potential alliance partner, given its extensive network (and shared terminals with VB in Sydney and Melbourne). Less obvious a partner is Skywest, but Virgin Blue and Skywest already have a close commercial relationship.

So could a Rex or a Skywest operate turboprop services (perhaps with new ATRs or Q400s) on VB’s behalf, whether under a simple codeshare, or a contract operator arrangement (as Qantas has in place with Cobham for QantasLink 717s), or a revenue sharing alliance, or even an equity tie-up? Certainly some sort of arrangement fits Virgin Blue’s ‘network reach through alliances’ strategy, and would further improve Virgin Blue’s credentials in being able to offer a complete network for business travellers and corporate accounts.

It will be interesting to see what develops.