Qantas chief executive Alan Joyce offered his first insights into the topics last July. Here’s what’s changed since Joyce’s first remarks and what further changes we can expect from Virgin.
I believe it’s very hard to replicate our network. It’s going to require a huge investment in new aircraft in order to replicate that network.
Virgin’s mainline domestic network rivals Qantas’s. For regional flying, Virgin is making inroads with this month’s announcement of a partnership with Skywest (although some frequent flyers have questioned the comfort of the planned yet unspecified turboprops compared to Embrarer E-jets, left).
Internationally, Virgin made significant network inroads into Europe with its partnership with Etihad Airways. The Delta partnership, be it a joint-venture or codesharing with Delta, will improve V Australia’s North American traffic. What remains is Virgin’s Asian strategy, which Virgin Blue chief executive John Borghetti has only said will entail more partnerships and Virgin flying some routes itself.
These intercontinental partnerships give Virgin Blue a virtual network. As Borghetti explained last August: “With a small number of airplanes [operating] into two key hubs, in Los Angeles and Abu Dhabi, we actually open up hundreds of destinations around the world, hundreds to the point we would never be able to fly to on our own without buying squadrons of aircraft.”
Frequent flyer: core of corporate market
It’s very hard for our competition to replicate our frequent flyer program. With 7.2 million members it’s got the largest penetration of any domestic market of any airline I think in the world. That gives us a hugely solid foundation and makes it hard for them to penetrate the corporate market as a consequence.
The most crucial part, along with codesharing, of Virgin’s partnership with Etihad is reciprocal frequent flyer benefits. Corporate travelers want to earn frequent flyer points they can use for personal trips and the Etihad partnership has helped expand Virgin’s limited Velocity programme. Velocity’s expansion will continue as Virgin partners with more carriers.
Qantas has not done itself any favour by taking away platinum elite anytime lounge access and priority check-in for silver members. In comparison, Virgin Blue Silver Status members, the lowest elite levels, can avail themselves of priority check-in. The highest Velocity elites, gold members, do not receive anytime lounge access. Given the number of disgruntled Qantas Frequent Flyer members, Virgin Blue might want to consider what the cost is of granting anytime lounge access and adding that perk into its plan to woo corporate travelers.
The product that we’re offering is miles ahead of the competition today and we’re not stopping there. We’re investing hundreds of millions of dollars in new product on the ground and in the air and that I believe will put it out of reach of where the competition can get without a significant investment in product and that’s going to be a big difficult thing for them without the core traffic.
Virgin’s product is the outstanding item that has yet to change and its domestic A330 configuration has not been released. Virgin acknowledges short-haul premium economy has not worked and will be changed. Lounges are also getting upgraded. Internationally Virgin needs to align its product with its partners, particularly Air New Zealand since the two will be codesharing across the Tasman and a product imbalance could make customers avoid one carrier.
The more pressing product concern may be with Qantas and not Virgin. Frequent flyers scowled in November at the image of the new domestic business class on A330 VH-EBO (right).
The seats were more akin to economy seats or Jetstar’s Star Class, ostensibly to make aircraft interchange between Qantas and Jetstar easy. Some frequent flyers said they would not pay for business class between Melbourne/Sydney and Perth if that was the product they would receive.
If there is one domestic interior Qantas should not dishevel, it is this one. Virgin Blue has said it will take three A330-200 aircraft to use on the Melbourne/Sydney-Perth runs. The interior is undisclosed, but if VH-EBO is the competition, Virgin has it easy. For everything else, Virgin will have to prove itself.
To each his own?
For Qantas it’s up to us to play our game and we play our best game. It doesn’t matter what the competition will do in terms of those issues because Qantas is so strong.
For all of Joyce’s public nonchalance, once the doors close, expect a fight.
Photo Credit: Virgin Blue from AirSpace photographer Rear Loader