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Exclusive: Paul Scurrah discusses Virgin’s new strategy

written by Adam Thorn | October 1, 2020

Virgin Australia chief executive Paul Scurrah has revealed that the reborn business’ new strategy will see it become a “high-quality, value airline”.

In an exclusive interview on the Australian Aviation podcast, Scurrah said Virgin’s problems stemmed from spreading itself too thin and “trying to be too many things to too many people”.

However, he insisted the new-look airline would emerge from the pandemic with “75 plus” aircraft and offer a network “not too dissimilar” to what it had last year.

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The Virgin chief executive’s interview will go live on Friday and marks the first time he has spoken in-depth about the plans for the business moving forward.

Speaking to host Phil Tarrant, Scurrah said his team have debated what to call the plan for the business after it emerges from the pandemic.

“It’s really hard … we’ve tried a few times to come up with a singular label,” said Scurrah. “The industry loves labels: full-service carrier, low-cost carrier, ultra-low-cost carrier or hybrid. We’re very reluctant to do that because we haven’t landed on one that’s very descriptive.

“But value is going to be an incredibly important part of our industry for quite a while after we come out of administration. And after we come out of COVID. Travel budgets for a lot of our loyal corporate accounts are going to be under pressure.

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“Lowering our cost base, but also keeping a very corporate-friendly product, will be even more important to those corporate accounts.”

And despite recent concerns by unions that the airline was planning to slim down its service, Scurrah insisted he is still targeting returning to operating 75 aircraft in the fleet.

“We won’t look too dissimilar to the network coverage that Virgin had previously,” said Scurrah. “And it won’t be that dissimilar from a product point of view either.

However, he said the administration process had enabled the business to “uncomplicate” the fleet and “take advantage of scale and simplicity”.

“We’ve been able to look at the commercial contracts we have with all of our suppliers and make sure we now recalibrate them to a more market-like contract. We’ve been able to assess whether they’re even worth having at all, based on customer feedback and how much weighting they put on it.

“And we’ve been able to be fairly clinical looking at the lines of flying we had and make sure that we’re pretty disciplined about where we put our aircraft and where we fly.”

He said the business’ problems stemmed from spreading itself too thin, but that large parts of the company were very profitable. Scurrah insisted the strategy of hitting the sweet spot between a larger carrier and a low-cost was the right call, despite pressure previously to revert to the airline’s Virgin Blue roots.

“We believe so strongly in our plan. And the opportunity presented to us was that the plan was able to be executed in a far shorter period of time,” he said.

“One of the most important parts of our strategy, and this lines up really nice with Bain as well, is having the flexibility to pivot or change direction slightly based on changing circumstances.

“We need to be nimble and flexible. And we need to make sure that we can move our business around, maybe we do more seasonal flying, as opposed to year-round flying. Those sorts of flexibilities that we need, that we didn’t have, I think are important for the future. And I think that’s why they backed the bones of the plan that we had.”

Bain beat out Cyrus Capital Partners in May to become the administrator’s preferred bidder for the airline, but the decision was only rubber-stamped at a final creditors’ meeting on 4 September.

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9 Comments

  • Paul Blackshaw

    says:

    The airline will be a very slim version in all respects to the original. Staff cuts and wages cuts and fleet cuts will be there solution.
    Perhaps it will work for them, Alan Joyce will be watching closely for obvious reasons.

  • Chris B

    says:

    Is it 75 B737s or 75 aircraft in total, including the F100s? Because it seems the fleet will be B737 and F100 based for at least a while.

  • Steve A

    says:

    Yes, Virgin needed to change tack because it was just a ‘me too’ airline before, copying off everything that QF did.
    That’s not bad in itself, but it becomes an Achilles Heel by allowing QF to attack it at every turn.
    Virgin’s new strategy is certainly better, but not sufficient to beat off QF, lead by the ruthless AJ, who as history has shown us, is happy to spend shareholders dividends for an entire 7 years to get his way.
    I did offer my very different plan to John B in 2016, when VA were about to start their final $1 billion turnaround, but he said, “too late Steve, the Board have already decided upon their strategy, ” which as we know, was flawed.
    Virgin could become the dominant carrier in Australia, and beat out QF, but not with this strategy. QF is at its weakest ever right now, with its poor management still in place. It has lost around a billion dollars in the 12 AJ years (that’s profits and losses added together). People only remember his 2 or 3 big profit years, and forgive him for his massive losses.
    VA needs to strike now. If Bain can’t figure it out, then come and see me.
    I am certainly not a Joycite. After COVID, he is the worst thing to ever have happened to QF.

  • TD

    says:

    I am surprised the Airline had to go into administration to implement what would be common sense changes. So much for the out of touch board directives. As far as traveling in 737s…..I’d rather drive or go on an alternate aircraft such as the A330. When one pays good money to fly the last thing they want to do be treated like a dead fish in a passenger equivalent of a noisy sardine can.

  • Bob Goodworth

    says:

    Mr Scurrah,
    Do you have a definitive time frame when Virgin will resume International Long Haul flights, 2, 3,4, 5 years or not at all in the foreseeable future. The faithful await your answer

  • Bob Goodworth

    says:

    International Long Haul flights? Awaiting a definitive answer from the power block

  • Interesting article by Paul Scurrah. According to Planespotters, Virgin Australia still has 5 Boeing 777-300’s. 1 of these is leased, however 4 are owned. Of these aircraft 4 are stored, including the leased aircraft, but one is still in service with the others parked in BNE and SYD. In terms of their Boeing 737-800 aircraft they are showing 35 which are leased aircraft whereas the remaining 39 737-800 are owned aircraft. One interesting fact it seems the Virgin have cancelled their order of 6 Boeing 737 MAX aircraft and have leased 6 new 737-800 aircraft which are due soon. I wonder whether these new Virgin Boeing 737-800 aircraft are going to be “wet leased” to Rex? As REX has indicated that they have 6 new 737-800 “on order”

  • David

    says:

    Did Mr Scurrah take a pay cut following Administration?
    Also, seems incomprehensible that Virgin Australia was not trading in February 2020, whilst insolvent.

  • Neville

    says:

    Prior to the all around stuff up , including the Virus . Are the Virgin shares held previously to the mess valid or not ?

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