V Australia Delays Last Two 777s, Might Not Take Delivery

V Aus at Avalon.jpg

Will Horton



[Updated with commentary at end]

V Australia, Virgin Blue’s long-haul subsidiary, has converted its last two B777-300ER on firm order to options, according to a company spokeswoman.

This was done in conjunction with Virgin Blue’s recent firm order for 50 Boeing 737s, which came with options for another 55 B737s.

Boeing was about to commence work on the two B777s due for delivery to the carrier next year, the spokeswoman explains. The carrier was originally due to take delivery of the aircraft in 2010 but last April delayed them until 2011 due to the global financial crisis.

Changing the orders to options “allow us better commercial terms, in particular more desirable delivery slots in mid-2012 to suit anticipated growth plans”, she says.

With Virgin Blue CEO Brett Godfrey handing over the reins to former Qantas executive John Borghetti on 8 May, the move also “gives the incoming executive management adequate time to consider potential aircraft capabilities and to assess options,” she explains.

She reiterates the carrier has not ruled out the possibility of not taking delivery of the aircraft. “Brett wants all options available to the next team.”

The spokeswoman adds the move “allow us better commercial terms, in particular more desirable delivery slots in mid-2012 to suit anticipated growth plans and to give our incoming executive management adequate time to consider potential aircraft capabilities and to assess options.”

“We’re slightly delaying delivery as an investment in time. It makes sense to allow the new leadership to engage in the long-haul program and to assess opportunities,” the spokeswoman says. Virgin Blue has also delayed any decisions about its future short-haul strategy, which it calls the “airline of the future”, until Borghetti arrives.

Boeing’s order and deliveries website reflects the carrier has cancelled two aircraft from its 2007 order for six B777-300ERs. The carrier currently operates four B777s, including three it owns and one on lease from ILFC, according to Flightglobal’s ACAS database. The carrier expects its fifth B777 to join the fleet at the end of the year.

Update: So what does this mean for V? Given that its fifth aircraft, due for delivery later this year, will be used for additional frequencies (and possibly one new route with limited frequency) it’s unlikely we will see additional V destinations until the sixth and seventh aircraft join the fleet, now looking to be in mid-2012.

The caveat is the JV with Delta, which is still pending approval. Delta could take over one of V’s routes or open a new trans-Pac route V would have access to.

Another factor is if Virgin Blue will order medium-haul widebodies like the A330 or B787, which would be suitable for serving many Asian destinations, which the carrier has indicated it is interested in. (Note: there have been rumours of starting a service to Hong Kong.)

While the 787-8 and -9 would have a lower capacity than the 777s, their fuel savings could make them worthwhile as the future expansion aircraft of choice, especially if Boeing proceeded with the -10 variant. But that’s all down the line, and V would have to defect to Airbus or work hard to secure early 787 delivery slots. Only Sydney-LA will be a daily route by the end of the year, and South America screams for another player–perfect Virgin territory. They’ll need the 777s.

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