Virgin’s domestic A330s: good for competition but not service

Chair_3.jpgVirgin Blue’s business class product on its A330 aircraft that will start service on 26 May.

The full details of Virgin Blue’s domestic A330 services, to commence 26 May on Sydney-Perth, were released today, and the result is lackluster and throws the premium service ball back in Qantas’ court.

Virgin Blue will operate the ex-Emirates A330-200 in Emirates’ exact configuration: 27 business seats in a 2-3-2 configuration (there’s one row of 2-2-2) and 251 economy seats in a 2-4-2 configuration. (Although the business seats were announced in February, Virgin Blue declined to specify the configuration.)

Chatter of Virgin Blue surpassing Qantas by not having middle seats in business, having meals in all cabins, and new IFE all did not eventuate. It was this one-upping that led Qantas to preemptively one-up Virgin’s one-up by flooding the Perth market with additional seats and better aircraft, namely international aircraft with lie-flat seats and greater pitch.

With Virgin not delivering a wow factor, this is Qantas’ chance to consolidate a schizophrenic operation that uses domestic and international A330s, 767s, and even the odd 747. That scheduling pattern is Qantas’ major downside as in business class some A330s do not have a middle seat, 747s do, and 767s are aging. International A330-200 aircraft and that odd 747 have lie-flat beds that are far greater value than a recliner seat. Passengers or corporate travel managers do not want to chase Qantas’ schedule for aircraft type.

The best case scenario, and thus pie in the sky, would be for Qantas to serve the transcon market with a single premium fleet as American Airlines and United Airlines do between New York and Los Angeles and San Francisco. AA has a dedicated 767-200 fleet while United has a dedicated 757 fleet, leaving no doubt what product passengers will experience. One answer for Qantas could be to keep on the transcon route international A330s that have a product superior to Virgin’s, which in turn is better than Qantas’ domestic A330-200 product.

Economy class fares much better on Qantas’ A330s, which offer free meals (Virgin, for now, does not) and Panasonic’s newest IFE system, the eX2. Virgin’s A330 currently has the Panasonic’s 2000-eX Hybrid IFE system installed, according to Flightglobal’s ACAS database (although Virgin could upgrade the IFE). Virgin Blue will, however, offer 32″ of seat pitch, one inch more than on Qantas. Virgin will also offer a direct entry lounge at Sydney airport.

But all of that needs to be put in the context of price. When John Borghetti announced Virgin Blue would acquire A330s, he made it clear the aircraft brought greater economics. So far it looks like those economics in business class are in favour of higher yields, not lower ticket prices: For business, Qantas today charges $2,890 for a sample round trip while Virgin is $92, or 3%, cheaper at $2,798 (that includes, for now, limo transfer at Sydney). Those fares are for regular web bookings and no doubt Virgin’s sales team will be pushing discounts for corporate contracts.

In economy class, Virgin is offering introductory $139 one-way fares, beating not only Qantas ($245) and Jetstar ($206) but closing in on Tiger (when looking at Melbourne offerings where the cat is $99-189). It remains to be seen where regular fares will fall, but it seems likely Virgin will beat Qantas. By how much will decide if Virgin’s product shortfalls are an even trade-off.

Qantas has more frequency and a better frequent flyer programme (although Virgin is looking to catch up there), but neither side can declare itself the winner in the market. Improvements could be made, or maybe they’ll both stay the same.


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