Indigo Partners’ Bill Franke has suggested that a shift towards a low-cost model could allow Virgin Australia to bounce back from administration.
Franke co-founded Indigo, which recently emerged as one of four suitors short-listed for the Virgin Australia sale. The company specialises in investment in low-cost carriers (LCCs), maintaining stakes in both Frontier Airlines and Budapest-based LCC Wizz Air.
Speaking at a virtual meeting hosted by aviation market intelligence firm CAPA, Franke said that low-cost airlines are better poised to recover from the impact of the COVID-19 outbreak in the months ahead.
“Low-cost airlines will be raising fares off a cost base 30 per cent lower than legacy airlines,” he said.
“Net-net I think the model performs better than other models as we recover from COVID-19.”
Franke’s Phoenix-based company is joined in its bid for Virgin Australia by BGH Capital, Bain Capital, and Cyrus Capital Partners.
The Australian reported on 20 May that three of four prospective buyers are looking to bring Virgin out of administration with a reduced fleet size. Speculation that a revived airline might operate under a low-cost scheme tie into Franke’s comments.
Though Franke did not state whether his company would look to axe international service, the 83-year-old did say that this would depend on consumer appetite for overseas travel post-pandemic.
“I get asked all the time, ‘Are you going to keep international flying?’ And the answer is that you have to fit yourself to the market and what the market wants,” he said.
“It’s not done abstractly. It’s done based on an understanding of the market and what the market wants you to provide.”
“We have to look at the Australian market in terms of what the Australian consumer wants in the product. It’s a process and development at this point of time.”
Franke compared the Australian market prior to the collapse as a duopoly, calling it a helpful competitive environment.
“But at the end of the day we see Australia as a very interesting market. We think the country needs to have two airlines and we want to assist Virgin Australia in being one of those airlines,” he said.