Article: Has Virgin Australia Had Its Goldilocks Moment?

[Moopere]

The point is that it’s a safe space for VA2 to sit.

If they go too much further down market they hit Jetstar and Jetstar has a lower cost base, and will wipe the floor with them and we will have yet another spectacular collapse.

Conversely if they dare go too near QF’s bread and butter (again) - the premium / business / corporate target - QF will carve them up for breakfast. Again.

So literally the only place for them to comfortably sit without attracting too much unwanted attention is just above Jetstar, pulling in some of the leisure crowd, and some of the more budget conscious small business.

Sure, I understand the problems of a 'new' entrant coming into a market that is demonstrably aggressively defended by an incumbent.

You've got to find your niche, your market penetration point, get in there, solidify and then (hopefully) expand out.

But, my original question about niche I guess was really from a customers perspective. What the compelling reason to use VA2? If you're budget driven then JQ is there in all its glory (heh) to service your needs at a price point where all or almost all other things come second to price. If you are happy to spend more and hopefully get a different travel experience then you've got QF at the top.

In the middle what do you really have as a customer? Its quite the delicate balance. If you really offer nothing, just the same cough service and product as the LCC JQ but you're trying to charge more using smoke and mirrors it won't take long before you're found out - particularly in our socially connected world today. There will always be an uninformed portion of the customer base willing to give you a shot, believing that you probably get what you pay for (ie, pay a little bit more and gain a little bit extra travel experience), but it will be vanishingly small and over time unsustainable as you become known for charging more but providing the same product.

So, my question remains really, despite the understanding of the danger (for VA) of trying to eat QF's lunch in any way shape or form, whats the customers reason for using VA2?

 

[stm1sydney]

I disagree that QF is at the top. VA provides me (IMHO) with a distinctly better travel experience in both J and Y (with the latter being YX generally). That is the compelling reason, quite simply. So in my assessment, VA is not filling a niche but a bloody large segment of the market (that is, most of it other than large corporates and govt, and super budget conscious leisure travellers).

Your mileage might vary if you travel to ports not in the VA network, so obviously your choice is limited. VA flies everywhere I want to go (and internationally, its partners do).

 

[eastwest101]

Sure, I understand the problems of a 'new' entrant coming into a market that is demonstrably aggressively defended by an incumbent.

You've got to find your niche, your market penetration point, get in there, solidify and then (hopefully) expand out.

But, my original question about niche I guess was really from a customers perspective. What the compelling reason to use VA2? If you're budget driven then JQ is there in all its glory (heh) to service your needs at a price point where all or almost all other things come second to price. If you are happy to spend more and hopefully get a different travel experience then you've got QF at the top.

In the middle what do you really have as a customer? Its quite the delicate balance. If you really offer nothing, just the same cough service and product as the LCC JQ but you're trying to charge more using smoke and mirrors it won't take long before you're found out - particularly in our socially connected world today. There will always be an uninformed portion of the customer base willing to give you a shot, believing that you probably get what you pay for (ie, pay a little bit more and gain a little bit extra travel experience), but it will be vanishingly small and over time unsustainable as you become known for charging more but providing the same product.

So, my question remains really, despite the understanding of the danger (for VA) of trying to eat QF's lunch in any way shape or form, whats the customers reason for using VA2?

For some people, the "compelling reason" to book VA is that people have no confidence that JQ will even get you to your destination on the day you booked (let alone the time of booking) so that's a non-starter for anyone who is traveling on any sort of timeframe because they are false economies if you end up sleeping on the terminal floor instead of arriving at your destination, and the price of QF fares can sometimes be 50-100% more expensive than a competing fare with VA or Rex. So QF isn't that good of an airline that it deserves to command such a massive price difference (after all you are still going to be jammed into a B737 mostly anyway at the end of the day) so VA has a shot of getting you to your destination, mostly on time, without having to spend your kids' inheritance. These are using your own money calculations.

Using other people's money is a totally and completely different equation - because its other people's/taxpayers money, then the decision for them to fly QF is not really a surprise to anyone.

 

[Moopere]

Ok, so I'm hearing reliability. As I mentioned earlier I can't remember now whether I've ever flown domestic JQ. I think in my mind I've been conflating 3K which is also 'Jetstar' (Jetstar Asia).

So the niche might be, we're LCC but we're reliable. If thats really true and not just perception I'd certainly pay a few bob more for that.

@stm1sydney : VA1 provided this level of quality for me domestically. I'm from PER, so back in the day I earned my plat status with VA flying transcon, almost all of that on A330's and a solid chunk in J. QF couldn't compete at that time for me, their J was quite comparable but at least 30% more expensive (at least!). JQ doesn't have J. So VA1's placement in the market suited me to a T.

I'm interested but its somewhat academic now for me. I'm spoiled enough that I can't do domestic transcon in a 737, they're just too horrible. There is virtually nothing else flying so I'll be travelling international from here on unless something changes. I know the QF A330's are for the time being still doing transcon at some times on some days of the week, perhaps theres a ray of hope for me there.

I really wonder if I'm such a niche customer? I might be. I'm looking at flights on AK whom I've never flown with. Flights to KUL from PER early next year for circa $1600 return on angled lie-flat - this isn't business class, I'm aware of that, but the miles/time in the air are roughly transcon PER-BNE say ... Is there really no domestic market for such a product? $3200-3500 return PER-MEL on QF J is not a reasonable ask imho.

 

[TMP]

I think we were spoilt in Australia on transcon for a number of years as a result of the VA1 and QF A330 battle. Expectations need to lower is my take.

 

[lovestotravel]

Won't be seeing QFA330's on PER for much longer as they keep getting pulled off for proper routes

 

[HS-TQE]

Also expect another QF A330 yanked off East Coast-PER/DRW as QF uses their Indonesia (CGK) allocation for summer seasonal A330 from SYD to DPS.

 

[AIRwin]

Also expect another QF A330 yanked off East Coast-PER/DRW as QF uses their Indonesia (CGK) allocation for summer seasonal A330 from SYD to DPS.

And new route ICN?

 

[Must...Fly!]

I think we were spoilt in Australia on transcon for a number of years as a result of the VA1 and QF A330 battle. Expectations need to lower is my take.

I have no problem with lower expectations if the carriers maintain the capacity (outside the immediate near term that can't be fixed) that is required between Perth and the eastern capitals. The reduced availability of seats is having a major impact on pricing.

 

[antycbr]

I have no problem with lower expectations if the carriers maintain the capacity (outside the immediate near term that can't be fixed) that is required between Perth and the eastern capitals. The reduced availability of seats is having a major impact on pricing.

Or we could argue that sane pricing has returned. VA lost a lot of other people's money trying to win a capacity war with QF, which also cost QF a lot of money too.

 

[tdimdad]

So the niche might be, we're LCC but we're reliable. If thats really true and not just perception I'd certainly pay a few bob more for that.

Perhaps it is "we are a mid-grade carrier with a FF program & some premium services (decent lounges, priority check-in, recliner seats for J)".
The challenge with this segment is that QF has been sliding down to the same segment so it'd getting congested. If QF was even a semi-premium carrier, then VA2's place in the market would be a lot clearer.

 

[AustraliaPoochie]

Once we get more info on REX's FF program, then we can make a decision as to who is a "real' Aust LCC.
REX could get into where VA1 used to be, just need more trans Aust routes, more 737s, better lounges, bearable fares, lower fares that count towards eligible flights for status, Aust based knowledgeable call centre staff... and keep their small plane fleet that can go where VA2 won't go, either on its own or via partners into small regional towns.
And VA2 can slot into something between a LCC and the lowest of the low, JQ/J*.

 

[Must...Fly!]

Or we could argue that sane pricing has returned. VA lost a lot of other people's money trying to win a capacity war with QF, which also cost QF a lot of money too.

I wouldn't agree that standard pricing is over $1000 return.

 

[antycbr]

I wouldn't agree that standard pricing is over $1000 return.

Have you adjusted your view for inflation, the price of fuel and wage costs? There is an element of profiteering going on but WA had very cheap airfares for a long time due to VA throwing too much capacity at WA.

The issue also is that the stage length of WA flights is consuming multiple equivalent golden triangle flights from a utilisation point of view so airlines will charge accordingly or redeploy capacity to where they can maximise revenue. You no longer have an insane approach by VA of overcapacity.

 

[HS-TQE]

Once we get more info on REX's FF program, then we can make a decision as to who is a "real' Aust LCC.
REX could get into where VA1 used to be, just need more trans Aust routes, more 737s, better lounges, bearable fares, lower fares that count towards eligible flights for status, Aust based knowledgeable call centre staff... and keep their small plane fleet that can go where VA2 won't go, either on its own or via partners into small regional towns.
And VA2 can slot into something between a LCC and the lowest of the low, JQ/J*.

If the FF program 'eventually' gets up. It was supposed to start last year along with getting 4 more 737s for a total of 10 737s around this timeframe.

REX's Singaporean consortium of Businessmen and Private Equity owners need to get spending CapEx, pronto. If they wanted quick expansion, as it seems spending the CapEx is something they're not willing to do at this time. PAG are just as conservative as their American rivals at Bain when it comes to CapEx investment in REX.

 

[Must...Fly!]

There is an element of profiteering going on

I'm glad we agree then.

I never said I wanted $250 return like the days of the capacity wars of 10 years ago. But clearly there's money being left on the table due to capacity constraints which need to be rectified for the broader health of the economy. It's no good for anyone for people to be priced out of travelling

 

[AustraliaPoochie]

Just had a look see, its already been stated that Bonza won't have a FF system, so its now a wait and see for Rex.
Maybe it was idle chatter that they would have a FF system, apart from their current one for ABN holders, ie business (flyer) earning points, but employees can use the points.
But that got stopped too didn't it?

 

[Moopere]

Perhaps it is "we are a mid-grade carrier with a FF program & some premium services (decent lounges, priority check-in, recliner seats for J)".
The challenge with this segment is that QF has been sliding down to the same segment so it'd getting congested. If QF was even a semi-premium carrier, then VA2's place in the market would be a lot clearer.

In my mind the above comment more fully describes VA1's niche, and it was the main motivator for me flying with them at that time.

Now though, I'm a lot less convinced. For example:

- Having a FF program ... JQ utilises QFF so theres no useful differentiation. I gather points with VFF to redeem for product I don't like? Used to be great for flying all over in reward J, but now, exclusively 737 ... yuck.

- VA's lounges are pretty basic, lets be honest. I've tried most of them. QF status holders on JQ flights as well as Q Club members can access QF lounges, so again, nothing really different here if you were to fly JQ.

- Recliner seats in J, well, heh, I just did one of these on VA2 in their 737. I wouldn't classify the recline such as it is to be much of a feature. I went PER-MEL in Y and MEL-PER in J, not sure which one was more uncomfortable.

For the price asked I agree QF could (should?) offer an actual premium product rather than 'semi-premium' as you say. But why would they consciously want to make space for VA by doing that? heh, seriously? Its a laughably awful situation really.

I mentioned a few posts above the D7 idea of angled flat beds. Admittedly D7 does this on A330's, so they have the room, but thats a really novel approach to providing something extra above the base level LCC model that still isn't a J product. I've never flown D7 mind, so I might report something entirely different once I do (smile) - but the idea I think is decent.

 

[jrfsp]

Qantas falls well short of Joyce’s 70% market share prediction

Qantas and Jetstar ended 2022 with 61 per cent of the domestic market, while Virgin drew 33.6 per cent of all passengers and Rex 5.3 per cent.

australianaviation.com.au

Seems VA is doing better than expected at capturing market share

 

[AIRwin]

Qantas falls well short of Joyce’s 70% market share prediction

Qantas and Jetstar ended 2022 with 61 per cent of the domestic market, while Virgin drew 33.6 per cent of all passengers and Rex 5.3 per cent.

australianaviation.com.au

Seems VA is doing better than expected at capturing market share

It can also be the entry of Rex?