Yeah, that's why I made my second point. The issue isn't so much that they refuse to join an alliance, but that their current partnership strategy is pretty cough and full of holes. The problem is they keep spruiking how great their current partnership strategy is, without fixing the holes and problems that need to be fixed.
The current partner strategy is great, for them! Low overheads, arms-length agreements which can be dissolved at relatively short notice, and legalised price collusion on some routes.
Joining an alliance would add additional costs like new staff, training, re-branding, systems integration, flight re-scheduling, compliance and ongoing maintenance. The revenue benefit from new pax might not outweigh the additional associated costs (points, lounge access, baggage revenue/cost opportunity).
The main advantages of an alliance are:
- NDC offer opportunity (more flight options, increased ancillary revenue)
- The value of Velocity points increases++
- Increased load through award flight distribution
- Other member airline traffic /FQTV revenue
Now, given that Virgin make the bulk of revenue from domestic flights and Velocity FF, the non-analytical approach is to project how many more seats would be sold by being in an alliance. Given loads are similar to QF; the benefit is likely negligible.
From a Velocity perspective, given the Australian-centric userbase, it doesn't make sense to worry about an alliance unless Velocity were to aggressively set-up shop in a new market.
Unfortunately, we'll never know the real reasons why JB won't join up, but my take is Virgin isn't confident in their own ability to fully leverage the benefits of being in an alliance which would require additional investments.
However, in saying all this - the current Virgin strategy isn't exactly panning out too well...
