Issue 341: Pride of the Fleet

Its efforts to take the fight to the Flying Kangaroo in the international market have, so far, been less visible when it comes to Virgin’s operations with its own aircraft.

Instead, Virgin has established partnerships and commercial alliances with the likes of Delta Air Lines, Singapore Airlines, Etihad Airways and Air New Zealand to grow a virtual international network, serving hundreds of destinations around the world via codeshares and interlines.

However, the upgrade of the premium cabins on Virgin’s Boeing 777-300ER widebodies represents one of the most significant investments the airline group has made to its international network, given the size and importance of the North American market for Australia.

By the time the end of August, all five 777-300ERs that serve Los Angeles daily from Sydney and Brisbane – and Abu Dhabi three times a week – will have been refurbished with 37 B/E Aerospace Super Diamond reverse herringbone seats that Virgin has dubbed “The Business”, a bespoke bar that is attended by cabin crew and a refreshed, intimate 24-seat premium economy cabin.

Further, the Panasonic inflight entertainment system has been updated with a new user interface and more content for all classes, while an extra-legroom Economy Space+ section has been added to the main cabin.

We are very proud of the bar. It is a bespoke design. BEN ASMAR

777s Head To Lake Charles

The 777 cabin upgrades and reconfiguration work has been carried out at Chennault International Airport situated at Lake Charles, Louisiana.

After operating a revenue service from Australia, the 777s ferried to the industrial airport where AAR Corp, a maintenance, repair and overhaul and aviation services firm, was contracted to do the work.

The old business and premium economy seats were removed before the area between Door 1 and Door 3 was completely stripped down – toilets, partitions, sidewalls, ceiling panels and overhead bins are all taken out – until nothing was left except the floor, the ceiling beams and the wiring and service pipes.

Virgin Australia head of customer experience Ben Asmar said it was like starting from scratch.

“It’s quite amazing actually to stand inside an aircraft with nothing inside,” Asmar told Australian Aviation in an interview.

“There is probably two metres up in the roof space that you actually can’t see normally. ” Once cleaned and prepped, the installation work could then begin.

Additional seat tracks were added to support the new business class bar and B/E Aerospace seat’s reverse herringbone layout, given Virgin previously had a forward-facing seat in business class in a 2-3-2 configuration, while there were also significant modifications to the ceiling panels and bins.

Asmar said the location of almost every passenger service unit – the overhead reading lights and information signs for seat belts and the use of electronic devices, as well as the oxygen masks – had to change, while a number of overhead bins were also moved around.

And the ceiling panels that create Virgin’s ‘starry night’ affect when the lights are off proved to be a challenge in the refit.

“We had a hell of a job trying to make them fit back within the new configuration as we had to make them align with the boundaries of the new cabins, which were very different,” Asmar explained.

“Where did it stop and start, given where the bar was located and the location of the second zone of business class. Essentially, it was a big puzzle that we had to put back together in an order that worked for our new configuration. ” The seats themselves were manufactured by B/E Aerospace in North Carolina, with each seat shipped as a separate unit to Lake Charles.

Asmar said there was a long list of individual engineering tasks for each seat to be put in position, with engineers and technicians usually installing the window seats first before working on the middle pairs in the 1-2-1 configuration that offers direct aisle access for every passenger.

Once installed, the seats were then connected to the power supply, the IFE and other aircraft systems.

There have been some well-publicised delays that have played havoc with the delivery of new Airbus A350-900s in recent times – prompting Airbus chief executive Fabrice Bregier to give some suppliers of equipment such as seats, galleys and lavatories a very public dressing down.

Asmar said although there were challenges with Virgin’s reconfiguration program, the airline worked collaboratively with suppliers to overcome them as quickly as possible to avoid any rolling delays.

“We also spent a lot of time making sure we had a well-oiled machine from a supply chain perspective and that has worked very well for us. There were a couple of little hiccups here and there but nothing that has caused any great stress during the embodiment of each aircraft,” Asmar said.

“Cabin reconfigurations are a complex business these days, due to the technology involved and the integration into the aircraft. There is always something that comes up that you have to react to. ”

Premium Economy Gets A Refresh (And A New Name)

The cabin between The Business and economy has also had a shakeup. Premium, as it is now known, features just 24 seats – down from 40 previously – a generous 41in pitch and an upgraded level of cabin service with plated meals and the addition of a self-service pantry, or larder.

Borghetti said the renaming the cabin was designed to establish a greater distinction with economy.

The reduction of 16 seats also helped create a more exclusive cabin and personalised passenger experience for those travelling in Premium, as well as ensuring Virgin did not have to sacrifice yields in an effort to fill seats.

“The moment you put economy in there it conjures up tight seat pitch, boxed lunches all that kind of stuff, so it is a branding exercise,” Borghetti told reporters during Virgin’s official launch in Los Angeles on July 20.

“It has to be seen as more than just the economy cabin. ” The old Recaro seats were taken out, stripped right back to the base, cleaned and any broken parts repaired, before new cushions and seat covers were put on.

Asmar said the small cocktail table and the stem reading light were removed, based on feedback from passengers and maintenance staff.

“There were quite a few complaints from passengers because a lot of them used to hit their leg on the cocktail table when they were getting in and out of the seat and would get in the way of our taller customers when sleeping,” Asmar said.

“There was also quite a bit of negative feedback of the stem light. From a maintenance perspective they are also a headache to look after, the parts failed fairly often.

“For all intents and purposes it’s almost a new seat when it goes back on the plane. It is now truly at the level of a domestic business class service. I recently flew on it myself and it is fabulous. ” The leftover premium seats were put in storage to be used for spare parts.

Designed To Create Something That Feels Truly Different

The chief creative officer of UK-based firm tangerine Matt Round said a lot of “blood, sweat and tears” had been shed during the project in an effort to achieve great design that would lead to outstanding customer experiences.

“This is the story of overcoming obstacles; of short timescales, allaying the opposing needs of various stakeholders, and of straddling different time-zones,” Round explained.

“Video conference calls between North America, Europe and Australia would regularly feature restless babies or a kid sheepishly getting ready for school in the background, to the slight embarrassment of the project team member.

“The new Virgin Australia cabins are stunning because tangerine got to the heart of what makes the airline tick and where design could make a difference. We used design to make the link between the aspiration of the passengers, engineers and airline staff, and by working together, we turned the ordinary into the extraordinary. ” Asmar said one of the most pleasing aspects of the reconfiguration was the new bar located at Door 2, which is staffed by a cabin crew member after the first meal service serving drinks and snacks for those in The Business looking to get away from their seats.

One of the initial concerns about revamping the bar was about the amount of space it would take up, given how real estate is at such a premium on board the aircraft.

To that end, Virgin, tangerine and the designers of the bar AIM Altitude came up with a way to use the “negative space” between the first and second section of The Business.

As a result, the small table at the back of the bar is the location of the foot cubby for the two seats behind it. Meanwhile, at the front of the bar the rack for bottles of alcohol – including a 12-year-old The Balvenie single malt that proved very popular among travellers on Australian Aviation’s trip to Los Angeles for the official launch – pushed into space not used by the seats in front.

“That allowed us to do two things. One, to make a stand-behind bar for our wonderful cabin crew to be able to serve drinks and two, it also allowed us to put the seats at the back which has made it a more flexible space, making it a true social zone that includes places to sit and relax, work or dine,” Asmar said.

“We wanted the bar to be so good that you forget you are in a plane flying at 30,000ft and think you are in a boutique bar in Sydney and I think we have achieved that.

“We really maximised the space in that section in a very innovative way, in cooperation with the seat suppliers and the bar designer, using every square inch.

“We really wanted the bar to be the ‘wow’ factor for every customer as soon as they stepped foot on the aircraft, no matter what cabin they are flying in, with the aim to generate excitement about their trip.

“We are very proud of the bar. It is a bespoke design. There was no base model so it was designed for us from the ground up. ”

And For Those In The Main Cabin

Although the focus of the events in Los Angeles were understandably on all the bells and whistles at the front of the aircraft, Virgin has also offered some improvements in economy.

The Panasonic inflight entertainment system on the five 777s was upgraded with a new user interface and more content for all passengers.

“We spent the effort and the money investing in the user interface and the content rather than the back end, which still works really well,” Asmar said.

“We wanted to take advantage of the 18in high definition screens in business class, but we also wanted that same great experience across every cabin.

“We are taking advantage of some of the features of the Panasonic system that we were not using in the past. ” The airline was also adding an Economy Space+ section in the main cabin, featuring five rows of extra legroom seats at the front of economy, where they are set at a 34in pitch, as well as seats at the exit rows. The seats will be available as a buy up from an economy ticket and come with perks such as checkin at a dedicated counter, priority boarding and a guaranteed first meal choice.

Economy Space+ was a similar concept to what Virgin’s trans-Pacific alliance partner Delta Air Lines offered on its daily Sydney-Los Angeles services with its 777-200LRs. Delta’s Comfort+, which has more legroom, priority boarding and some extras on board, is available for purchase and also offered complimentary to the airline’s elite frequent flyer members, subject to availability.

Three of Virgin’s 777s also had all their economy seats that were manufactured by Koito replaced with the Recaro economy seats that are also on the other two 777s, creating a uniform economy seat across the fleet.

“The economy seats on those three aircraft had some problems that we couldn’t rectify with that supplier as they no longer manufacture seats,” Asmar explained.

“Having the aircraft on the ground was a great opportunity for us to get this done at the same time and ultimately save some money and future down time. ” Overall, the cabin changes have resulted in a reduction of 22 seats on board Virgin’s 777s, from 361 seats under the old configuration to 339 under the new configuration.

And in a win for the passenger experience, Borghetti said there were no plans to change its 777 economy cabin to 10 across seating, from nine across currently, adding emphatically it “won’t happen”.

“I know economics are important but there is also a little bit of human dignity that you’ve got to you allow people to have,” Borghetti said.

Virgin Lifts The Bar On Trans-pacific

Figures from Virgin show the US is the third biggest market for Australia for tourism, contributing about $2. 6 billion annually.

It is also a strong corporate market, with deep business links between the two countries. Indeed, Virgin and Delta Air Lines’ submission to Australian Competition and Consumer Commission (ACCC) to renew their joint-venture alliance in December 2014 noted the trans-Pacific route had the highest share of inbound business purpose traffic of any Australian international route.

That perhaps explains not only the decision to upgrade the business class product, but also to increase the cabin to 37 seats, up four from 33 seats previously.

Borghetti said the fact every passenger in The Business had direct access to the aisle was a huge selling point for Virgin, given not all carriers on the trans-Pacific market could make that claim.

As a result, Borghetti said the airline would be able to “charge a premium on our previous fares” given its market-leading proposition in business class.

“It puts you in a position where you can sustain a better pricing structure because people will demand an aisle seat,” Borghetti said.

“The pricing on this product in business class will be a couple of hundred dollars higher as of when the program is finished in September.

“The big issue here is any airline that operates long-haul with a business class cabin that has a middle seat has to start discounting it heavily because the consumer expects much more than that these days.

“At the very minimum it is one seat away from the aisle and not more than one person sitting next to you but the leading product is access to the aisle for every seat, which is what this is. ” And in an insight into his own travel preferences, Borghetti said access to the aisle was his number one priority on a flight.

“When I travel, an aisle seat is all I care about. I don’t care if it is in economy, business or first, as long as I’ve got an aisle seat,” Borghetti said, before quipping, “Well, maybe I care a little bit. ” The Australia-US market has undergone a significant shakeup over the past 12 months, with the arrival of American Airlines in Sydney, Qantas’s return to San Francisco and United’s move to deploy the next-generation Boeing 787 Dreamliner on all its Australian routes.

In addition to the competition between Virgin, Delta, Qantas, American and United, there is also a big push from Air New Zealand to feed its North American routes with Australians connecting over its Auckland hub, leading to bargains such as $900 return from Australia to New York.

While Borghetti acknowledged there had been a big influx in capacity, he said the pricing pressures were mostly on the economy cabin, with demand in the premium cabins still robust despite having more seats in the market.

“The big issue is the huge capacity growth in economy cabin moreso than the business,” Borghetti said.

“That’s why you saw such pricing as you did a few weeks back of below a thousand dollars. ” Figures from the Bureau of Infrastructure, Transport and Regional Economics showed the number of passengers travelling between Australia and the US had grown 8. 5 per cent in the 12 months to May 2016.

It will be interesting to observe in the months and years ahead whether the product upgrades prove enough of a drawcard to convince passengers, particularly those loyal frequent flyers of Qantas and United, to make the switch and help return Virgin’s international network back to profitability.

More Product Improvements In The Pipeline

Virgin also announced during its official launch of The Business in Los Angeles plans to equip its 777, 737 and Airbus A330 fleet with inflight internet Wi-Fi from mid-2017. However, there were few details about the specifics of the program.

“We are keeping the project a bit of a secret,” Borghetti said.

“We have a very innovative model that we are working on and we will announce our partners and how it all works later on in the year so stay tuned.

“It’s a combination of financials, having the right model and I think we have landed on the right model, and yes technology. ”

Could The Future 777 Network Include Hk Or China?

Virgin’s five 777-300ERs and six A330-200s now have an identical product offering in The Business, notwithstanding the side consoles and storage areas are about 20 per cent larger on the Boeing twin owing to the bigger cross section of the fuselage.

Not only does that give travellers a consistent product when travelling on domestic trans-continental and long-haul services, it also gives the airline some flexibility when it comes to its international network.

In Virgin’s application for capacity to fly to Hong Kong and Beijing -flights were due to begin in June 2017 – it said the two new routes would be operated by A330-200s, which have 20 The Business and 255 economy seats.

However, there looks to be flexibility in the fleet to deploy the 777 on those new routes, should Virgin believe there was sufficient demand to warrant the larger aircraft, without compromising the passenger experience.

Borghetti was tight-lipped on what, if any, changes could be made to the fleet for the airline’s expansion to China and Hong Kong in partnership with Hainan-based HNA Group.

“We’ve got a few plans there,” Borghetti said.

“Don’t forget that we’ve also got through the rationalisation of the fleet, it does at the edges give us more utilisation on certain equipment that has a flow-on effect. ”

Passenger choice the focus for incoming Virgin executive

As the head of LEK Consulting’s global aviation and travel practice, one of John Thomas’s jobs was finding ways for airlines to improve the bottom line.

To that end, in 2008 he was behind the introduction of checked baggage fees in the US, helping usher in the era of huge growth in so-called ancillary revenues.

That focus on ancillary revenues will also be part of his role as the group executive for Virgin Australia’s domestic and international operations, as the airline targets a return to profitability after a posting a statutory loss in 2015/16 as a result of write-downs and one-off restructuring charges.

However, rather than taking something away something that used to be provided as part of the cost of a ticket, such as bag fees, Thomas said ancillary revenues were now more about giving passengers more choice.

“The industry has got to get away from just selling on price, we’ve got to sell on product,” Thomas told reporters on the sidelines of Virgin Australia’s business class launch in Los Angeles on July 20.

“In the past it was about having a generic product – you took the price you were given and it was just all very rigid.

“The industry has always said no to people. You say ‘can I change my ticket?’. No. ‘Can I go to the lounge?’. No. ‘Can I do the expedited security?’ No.

“But now, especially with millennials, people want to pick the price and the product experience and they want it personalised.

“What ancillaries are about now is saying yes because the airlines all of a sudden recognise that if I do it within my existing supply chain, so if I don’t change things dramatically, I can actually give people that choice. It costs me nothing and they feel better about it. ” A November 2015 report from IdeaWorks Company estimated airlines around the world would book ancillary revenues of US$59. 2 billion in 2015, representing just under eight per cent of global airline revenue.

The figure is more than double the US$22. 6 billion in ancillary revenues racked up in 2010 and up from 6. 7 per cent of all revenue, as full-service and low-cost airlines alike continue to expand the range of buy-up opportunities such as seat selection, points/mileage boosts, extra leg room, early boarding, food, in-flight entertainment, on-board wifi, lounge access and priority security.

Airline websites are also selling extras such as hotel bookings, car rental, travel insurance, overseas sim cards and tickets to local attractions, all of which earn commissions, as part of the ticket booking process.

Thomas noted that in the US some 70 per cent of ancillary revenue at full service carriers came from passengers paying for “enhancements” to the travel experience, rather than for “takeaways” such as bag fees.

“For the full service carriers, again we’ve been very nervous about giving people choice,” Thomas said.

“In terms of ancillary revenues for the Australian market it is all about how can give people more choice. ” Thomas cited Virgin’s 777 as an example of the airline being ahead of the competition through giving passengers the ability to personalise their travel experience.

Within the economy cabin, the airline has created Economy Space+, featuring five rows of extra legroom seats that are available as a buy-up from an economy ticket, adding a quasi fourth class to the aircraft.

“The 300ER is by far my favourite aircraft,” Thomas said.

“I am probably the biggest sales advocate for selling this aircraft because the economics of this aircraft are incredible.

“It’s big enough that you can actually do some innovative things in the cabin in terms of smaller cabins in economy and stuff like that.

“We don’t like to say it, but people don’t like to travel. We all like to have control in our lives and what’s as far away as having control in your life than sitting in an aircraft at 30,000ft hurtling throughout the sky? So if you can give some of the control back, if they feel like they are controlling, it makes it a better experience. ” He was also a big fan of the ability to pay to boost the amount of miles earned for a flight either at the time of booking or checkin, which is currently something offered by the US carriers, believing it could be particularly attractive for travellers who only flew a few times a year.

“If I am infrequent traveller and I am part of Velocity, I may never think I can actually get to a level where I can redeem the points so I don’t ascribe a lot of value to those points,” Thomas said.

“All of a sudden if you, the airline, say, you can actually buy some additional points which all of a sudden take you from not being able to redeem to actually redeem, those points that had no value all of a sudden have huge value for you. ” Virgin chief executive John Borghetti said at the launch of The Business in Los Angeles Thomas would join the company in September.

“He will be group executive of the Virgin airline and he will be my right hand,” Borghetti said.

“John and I have been talking about some very interesting and innovative ideas. Watch this space. ” Thomas’s appointment was expected to free up Borghetti from some of the day-to-day management of the airline to focus on establishing Virgin’s operations in China and Hong Kong as part of its strategic commercial alliance with HNA Group.

It can also be seen in the context of succession planning at Virgin.