Jetstar Snags Air Asia Dashing Virgin Hopes

The oft rumoured deal between Air Asia and Virgin Australia Group for the creation of an ultra LCC in the Oz market seems to be as dead as the Dodo.

On Wednesday ATW is predicting that Air Asia and Jetstar will form a partnership initially marketing based but over time it will morph into a bigger arrangement.

Comprising shared resources - virtual code sharing is expected to be the first fruits of the agreement giving the two carrier groups the opportunity to expand reach within the Asia/Oz market one of the fastest growing segments in the region.

With Air Asia X is now serving 3 destinations in OZ - Gold Coast, Perth and Melbourne. Jetstar is already well entrenched in Singapore through its Jetstar Asia and Jetstar Vietnam affiliates. Surprisingly there is little overlap between the two companies.

Now will this be a marriage of convenience or simply a series of marketing based dates? There are some basic issues that will need to be addressed. Qantas (Jetstar's parent) has been in league with Singapore interests who are not necessarily aligned with Air Asia. Air Asia X is making inroads into QF's long beloved Kangaroo route. A daily (now conventionally timed) flight on A330-300 aircraft is a fair number of daily seats to KUL. Does this also indicate a pulling back by QF from its relationship with BA?

For Virgin this reduces the options open to them. They are now looking westwards for their relationship with Delta to matter. If JAL and Delta come to an agreement then we could speculate that Virgin could become a fully fledged member of Skyteam - marking its transition from LCC to Full Service Carrier. Its already hynrid enough!

Cheers

Virgin Sticks With EDS for Hosting

Virgin Atlantic is not moving - well at least not for another 5 years. They are going to stay with their current hosting provider - EDS. A few tweaks here and there on the current architecture - but essentially it is the same as before. It would seem there is no commonality with Virgin American (who is with IBS) and Virgin Blue (who is with Navitaire) and even V (who will be with Sabre) - it seems no one has an integrated strategy at Virgin's airline brands. I wonder who Virgin Galactic will choose?

Go figure.

Cheers

Virgin's V Australia sets up Independent Travel Agency Clearing

The wheels of the IATA BSP machine clearly rolled too slowly for Virgin Blue's new long haul subsidiary V Australia. So rather than sit on their behinds - those sassy Aussies decided to set up their own facility in Australia where most of their revenue will originate for the early flights.

The new VSP - V Australia Settlement Plan will be available almost immediately. Given the strength of Virgin Blue's brands in the market: Virgin Blue, Pacific Blue, V Australia and the proposed joint venture with Air Asia and you have to wonder whethr this is the writing on the wall for the BSP facility in Australia.

This is a good issue to examine. The direct costs of BSP have for a long time been rather small. However both ARC and the variou BSP's have raised charges to a point where not just the direct costs but the total cost of maintaining a BSP facility becomes less attractive. Indeed we have seen airlines like LCC Spirit in the USA exit all together. In the age of Google Checkout and eBay's Paypal, you have to ask what value does this form of financial fulfilment bring?

I firmly believe that an airline should be looking hard at the cost of BSP/ARC infrastructure if it is to reduce total costs. Remember chaps its not about cost cutting it is about simplification and cost removal. Perhaps IATA should consider some of its own medicine in "Simplifying the Business".

Cheers

OZ experiencing pain - The Duopoly are cutting

Both Qantas and Virgin Blue are experiencing a degree of pain in the economic downturn.

Qantas has announced plans to cut a further 1500 staff and ax both routes and ground aircraft. 767-200s are already gone, 18 737-400 Classics, and while that nicely painted Nalanji Dreaming 747-300 has long since gone the remaining 747-300s in the fleet are being grounded. Likely the JetConnect subsidiary in NZ will also get some cuts. Jetstar will see a slowing of growth. It has trimmed its growth to zero from 8% and will shut the US and London Call Centers. A savage cut will occur with 20% cuts in Admin and HQ staff.

For Virgin Blue soon to be Toll free (sic!) routes are being cut, staff laid off and I suspect some deliveries being deferred and aircraft being temporarily grounded. No word on their JV ultra low cost venture.

This is not just a problem for the USA folks

Virgin Blue a takeover target as Toll exits?

Virgin Group is now the largest single shareholder in the Australian formerly LCC now major network carrier. Toll Holdings has finally ended it ownership position leaving Branson with a small holding and the rest in institutional and public hands.

But after all the shenanigans over its ownership, Virgin Blue might finally be a target of a takeover. Given the tortuous history of airline ownership in Australia, we can always expect the unexpected.

So lets see who emerges as a potential winner. Perhaps SQ might finally realize its vision of a Tranpac carrier by acquiring the Oz based carrier. But then I am merely speculating. But it would be nice to see Tiger and VB together with Tiger being the Uber LCC brand instead of Air Asia. What do you think?

Cheers

Timothy

Virgin Blue gets punished for straying from the fold

Virgin Blue was one of the original Low Cost Carriers. However it has strayed from the model and today - it is probably beginning to regret that.

In the last 3 years it has bloated up with the usual accouterments of the Full Service model to wit:

1. Lounges
2. Assigned Seating
3. GDS Participation
4. Multiple aircraft types
5. Interlining

There are more

And to cap it all - it has an MOU with Air Asia to develop a new LCC (conveniently called an ULTRA Low Cost Carrier.)

Well today it seems that this is now coming home to bite badly. JP Morgan has issued a pretty nasty coverage analysis that has been widely picked up down under. There is talk of the airline not surviving.

With Qantas cutting back significantly on both major brands (Jetstar and QF Mainline) Virgin Blue will have no choice but to follow suit.

It may just be me - but it seems that if you have the word Blue in your name, you start as a LCC and then order Embraer E-Jets you end up in trouble. But then this could just be coincidence.

Cheers

Timothy

Virgins seem to be everywhere - and not so cheap

For some time we have seen Virgin Blue evolve from a LCC into - well something that looks remarkably like Ansett except better managed and making some money. However in recent years after the initial blush it too has seen its share of back room ownership struggles that I am sure is still making dear Sir Reg spin in his grave.

Now days after reporting that we believe Virgin Blue is no longer a true LCC airline - it seems the management paid attention and has fallen in love with Air Asia's model. It is rumoured to be looking at setting up JV based in OZ for a true new LCC based on Air Asia.

Virgin Blue is still not quite fish nor fowl and has not been able to achieve the stellar results of some of its fellow (now former) brethren such as RyanAir. Its yields last year were only 9.7% compared to the 21.1% for the aforementioned Irish LCC.

So far Virgin has not done well in trying to get a formal LCC operating, sustaining profits in the model. Perhaps it should not try again! Indeed the last 2 Virgin operations have been anything but LCC.

Cheers

Virgin Oz - Splits 4 ways

Following in the footsteps of its arch rival Qantas - Virgin Blue is now the uber-brand for the Ozzie carrier. As it has slowly and relentlessly moved upmarket with its primary brand going after the corporate market - Virgin has seen its low cost roots (and routes) usurped by the upstart part of the Qantas group - Jetstar. With Tiger airways a mere few months away from starting domestic Oz routes - Virgin is not sitting still.

The company will now have 4 main brands:

Virgin Blue will be the premium branded service for Domestic routes.
Pacific Blue will be APAC regional routes including TransTasman services already in operation. The two newcomers will be the Long Haul (initially Trans Pacific) 777 service and the even sooner to be launched LCC player.
Commenting to Travel Weekly Australia at the Australia Tourism Exchange on Monday May 29th, Brett Godfrey, Virgin Blue CEO said "As we already have an Aircraft Operators Certificate (AOC), we can be up and running almost immediately". This pits Virgin Blue firmly against its rival. With some variation!

We believe that now the ownership issue is long resolved the company has been planning this expansion strategy for some time.

With Qantas itself in somewhat disarray following the recent debacle of the APA aborted tender and the subsequent resignation of 2 board members, we can see that there is life in the old dogs yet. Now why didn’t Ansett do this???? Answers on a postcard or email to me asap....

Cheers

Timothy

timothyo@t2impact.com