Virgin’s new plan will up our market share, predicts Joyce

written by Adam Thorn | October 23, 2020
Qantas A380 takes off from YMML (Phillip Gelling)
Qantas A380 takes off from YMML (Phillip Gelling)

Qantas chief executive Alan Joyce has predicted Virgin’s new scaled-back strategy will see his airline’s domestic market share increase from 60 to 70 per cent.

Speaking at the business’ AGM, Joyce also said border closures had cost the company $100 million and flights to the US and the UK are unlikely until the end of next year.

Joyce’s comments come just a week after Virgin’s current CEO, Paul Scurrah, apparently resigned to be replaced by former Jetstar boss Jayne Hrdlicka.

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His departure is significant because he was synonymous with the airline’s plan to operate as a mid-market ‘hybrid’ rather than reverting back to being a low-cost carrier like predecessor Virgin Blue.

“Over time, our domestic market share is likely to increase organically from around 60 per cent to around 70 per cent, as our main competitor changes its strategy,” said Joyce referring to Virgin.

He also told shareholders that the “unexpected” closure of several domestic borders “delayed” the airline’s recovery.

“We had expected Group Domestic to be operating at about 60 per cent of pre-COVID levels by now. Instead, the continued border closures mean capacity is now below 30 per cent,” said Joyce.

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“This delay resulted in a $100 million negative impact on earnings for the first quarter of FY21, and will have an impact on Q2 as well.

“Assuming Queensland opens to New South Wales in coming weeks, we expect Group Domestic capacity to reach up to 50 per cent by Christmas.

“We know that latent travel demand is strong. We saw that with our ‘scenic flight’ earlier this month, which sold out in 10 minutes. And we saw it when South Australia opened to New South Wales, with 20,000 seats selling across Qantas and Jetstar in just 36 hours.

“With most international travel off limits for a while, we’re expecting to see a boom in domestic tourism once more borders open up. The group is very well positioned to make the most of that opportunity.”

Chairman Richard Goyder added that WA and Queensland’s border closures don’t “seem to be based on the actual health risk” and “ignore the broader economic and social risk involved with staying shut”.

Earlier this month, Australian Aviation revealed how Queensland’s decision to reshut its border to NSW has bizarrely caused Brisbane to surge past Sydney and handle more than twice as many passengers per month as its larger rival.

The knock-on effect of Premier Annastacia Palaszczuk’s restrictions meant Brisbane clocked up 324,188 total passengers in August versus Sydney’s 129,000.

Significantly, the Queensland capital’s numbers were down only slightly from July (358,537) whereas the NSW capital’s collapsed 60 per cent (from 317,000). The next month, Sydney’s traffic continued to flatline.

17 Comments

  • Stu

    says:

    I wonder if he gets his predictions from his old mate, the new CEO of Virgin Australia.

  • Pete

    says:

    Hrdlicka will coldly and systematically destroy the entire corporate culture of VA, which is exactly what her overlords at Bain expect her to do.

    And to think some poor naive fools were surprised that a group of billionaire venture capitalists went back on their word. The only shocking thing is that anyone was shocked.

  • Trevor

    says:

    Air passengers’ would be reluctant to buy tickets with VA. There’s way too much uncertainty with their future (?)
    IF it downgrades to an LCC, many people will be put off by that, especially for longer Dom flights’, with their poor catering offerings.
    It’ll certainly be ‘you gets what you pay for’ sort of transport.
    QANTAS will do well, in this scenario.

  • John

    says:

    At the end of the day , Virgin 737 still have Bus seats up front . If they price them right ,sort out their catering and reopen the lounges I would look at them .

  • Sam

    says:

    “with their poor catering offerings”, it certainly can’t get any worse than the morsels (at best), that Qantas had to offer. Both Qantas and VA are going to be very scaled down versions of the past.

  • Adrian P

    says:

    Same routes.
    Same aircraft.
    Same ground service agent.
    Will QANTAS be able to charge more than Virgin if the difference is a full service tea and biscuit.
    It worked for Virgin Blue and it works for ALDI.

  • Ian

    says:

    qantas market share might improve, but not on very profitable BNE-SYD-MEL which is where it counts.

    Regional services like Cairns are not big profit earners.

    Here come lower cost Virgin & in March Rex. I would never pay cash to fly qantas.

  • Harry

    says:

    Most people are happy to drive 3-4 hours to a destination without expecting full service food and beveridge. What’s so hard about taking what you need when you leave? It’s pretty much only the airline spin on top of the consolation prize of frequent flyer programs to take the edge off the inconvenience of flying at all that people respond too Ike sheep.

  • Travel

    says:

    Just some quick numbers.

    Prior to VA going into administration they had an active domestic fleet of approximately 107 aircraft. If we consider they had approximately 34% of the market, every percent of the market represented just over 3 aircraft.

    With the new VA owners stating they will down size to a single 737 fleet of approximately 56 aircraft, they will be reducing the size of the airline by about 45%. This should equate to a revised market share of approximately 19%.

    With both REX and Alliance laying down plans to expand their fleets and enter into markets traditionally controlled by QANTAS and VA, using Joyce’s number of a revised 70% market share, he has left 5% of the market on the table for these new entrants.

    With 5% of the market equating to approximately 17 aircraft, it just may be the case the business case for both REX and Alliance has some numbers that the market as a whole is backing.

    The question ultimately becomes is when will the market rebound and if so what will its overall size be?

    With QANTAS announcing they are currently operating cash positively, they are well positioned to take full advantage of the new reality as markets start to return to normality.

    Interesting times.

  • Andrea Shearer

    says:

    Fully concur with the comments by Stu and Pete. A lot of people had a gut feeling when Bain passed the post as the winner, the other bidder stood little chance . I hope Rod Sims Chairman of the ACCC will monitor the competitive advantage of all airlines as previously stated. Trevor I think focusing on the menu alone is a bit strange. I wish all those that took voluntary redundancy with Virgin and those left, the very best in new endeavors or showing why people have chosen to fly Virgin Australia.

  • Don (Dreamer59)

    says:

    I tried their sale and found myself paying more than 4,000 FF points than s month ago. My lounge passes from Virgin Money are disappearing with time and no sign of when if ever they will reopen. That’s alright though as Virgin offered me an upgrade to business so I could try their noodles. Another example of Corporate lies to which my Loyalty has gone as well. I expect Paul and the board had a conscious vote and we all know what the future is!

  • Tony

    says:

    Tiger didn’t do to bad with its LLLCC offer. I think Virgin going back to its initial baseline will do ok. Not everyone wants average airline food at inflated prices when there’s an alternative to byo.

  • Gary

    says:

    Qantas do well….. bwwww ha ha ha ha ha Joyce hopes so he can pocket another million in bonuses. The fact remains if Qantas do more business it will be because Virgin has uncertainty or “issues”, not because Qantas are a better product. That fact damns Qantas to being an average airline, very average in-flight service, seat pitch, width and reliability are wanting….. getting customers by default aint a feather in its corporate cap.

  • Anton

    says:

    Hrdlicka is nothing but a stupid CEO of Virgin Australia! If Virgin Australia goes back to a full service carrier, then it will go broke again!

  • Nicholas

    says:

    What a mess, just shows you can’t expect any decency or truth from Private Equity.

    Can’t see VA surviving long term, what’s it going to do now? out JQ JQ???

    The only natural customers that it will attract will be the QF haters.

    Sad, very sad.

  • Rocket

    says:

    @Pete
    “destroy the corporate culture”……. you mean the same corporate ‘culture’ that fritted away hours of productive time parroting ridiculous weasel words into every non-productive and wasteful meeting such as “what that looks like”, “the education piece”, “going forward” (and the even more grating “going forwards”), “reaching out”, etc.
    Meanwhile the corporate ‘culture’ saw the absolute waste of billions of dollars VA didn’t have and ran the carrier into the ground metaphorically speaking.
    The airline needs a new corporate ‘culture’ administered like an overdose of laxatives to clear all the crap out of the ranks. The front facing staff will suffer but it won’t be because of the new CEO or Bain, it will be because of the absolute spraying of money around like a fire hose by the previous, incompetent management and the upper levels – there’s a reason why HO and management are called ‘village idiots’ in VA….

  • Ian Deans

    says:

    These days ALL our airlines offer very average cabin .service…and QF charges more for it. Why would we pay more for the same. Bring on the competion…..

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