Five things to watch for in Bain Capital's new Virgin Australia
From the seats to the eats, here's a rundown of areas where Virgin loyalists are waiting for details to emerge.
By David Flynn, July 8 2020
Bain Capital is now behind the stick at Virgin Australia, and the US-based private equity firm is pressing ahead with its plans to reshape the challenger airline into a smaller, streamlined carrier.
Broadly speaking, Bain will generally embrace and accelerate the pre-pandemic plan of Virgin Australia CEO Paul Scurrah, which he’s often described as “turning a great airline into great business."
And it's the 'business' side of things where Bain will bring its expertise to bear, beginning with repositioning Virgin as a value-oriented 'hybrid' airline which will focus more on outright profitability than pie-chart market share.
For now, Virgin Australia remains in a holding pattern – still flying, but with a vastly reduced schedule and service offering, and all airport lounges closed.
It's not known when Bain will pull back the curtains on its Virgin Australia 2.0 game plan, but should the airline's 12,000-odd creditors – who between them are owned almost $7 billion – approve of the deal recommended by administrator Deloitte when they meet on August 22, then here's what to watch for.
1. Business class
Bain's Virgin 2.0 is expected to retain the business class seats of its Boeing 737s, although the international-grade Airbus A330 business class will vanish from the east-west routes as those leased jets are handed back to their owners.
The Executive Traveller take: Cutting the baseline costs of business class – a move that's likely to see Luke Mangan cast aside – will give Virgin more latitude in selling those eight seats at a sharply competitive price against Qantas, as well as encouraging points-based upgrades from Velocity Frequent Flyers.
Bain's local managing director Mike Murphy has made it clear that Virgin won't chase the same well-heeled high flyers as Qantas.
"We are not looking to take Qantas head on, especially in their corporate part of the market," Murphy has said, noting that Virgin's previous battle for the high-end, suited-and-booted business travel brigade "wasn’t a happy outcome for anybody."
Instead, expect to see the primo cabin targetted at small- to medium-sized businesses as well as the self-employed, all the while keeping its focus on the 'value' proposition.
2. Economy class
Bain's emphasis on Virgin being a 'value-based' airline aimed at mainstream travellers means that economy class will become its battleground against both Qantas and Jetstar, while add-on ancillary fees will become an engine of profitability.
The new Virgin Australia will go mid-market and look to recover that 'Virgin vibe'.
The Executive Traveller take: Bain will be bullish on the value proposition – the sweet spot of what travellers actually want and what they're prepared to pay for that – and it could do worse than to ape Air New Zealand's 'Seats to Suit' approach.
Expect Virgin Australia's entry-level economy fares, which have long included one piece of checked luggage up to 23kg, to be stripped back to a carry-on bag: with a sustainable price-cut to match, this alone would appeal to many travellers, including some business flyers.
We'd also expect Economy X to remain in some form: the combination of extra legroom, priority boarding and reserved overhead bin space is a proven model of many airlines, especially the largest US carriers.
Review: Virgin Australia Boeing 737 Economy X
3. Meals
While its Luke Mangan-created business class menu was generally well received, Virgin copped plenty of flack for its economy class meals, which more often than not were scant snacks.
The Executive Traveller take: Don't expect to see those Luke Mangan meals return – nobody flies any airline for the food alone, and Bain would sensibly be aiming at what really matters to business class travellers in order to identify and remove what's not near the top of that list.
Luke Mangan's inflight meals for Virgin Australia were a hit with many Executive Traveller readers.
In fact, it's not beyond the realm of possibility that economy class might see no meals or snacks offered on the key 'golden triangle' routes between Brisbane, Sydney and Melbourne.
Passengers, it could be argued, have plenty of opportunity to grab a bite in the lounge or at one of the airport cafes – and with a flight time of 90 minutes to two hours, when else in daily life can you not go for that long without food?
4. WiFi
Qantas and Virgin Australia launched inflight Internet within weeks of one another in April 2017.
Qantas declared its Qantas WiFi would be free, so Virgin followed suit until April 2018, when it began charging for a high-speed connection at upwards of $9 per flight while keeping free a 'basic' service suitable for social media, email and Web browsing.
The Executive Traveller take: Bain is likely to keep WiFi on the menu if it can slash the standing cost of simply having the service available and reserving sufficient bandwidth for each aircraft – these are costs the airline has to pay even if nobody on a flight is using WiFi.
But we'd not be surprised to see WiFi trimmed back to being at best a free service for messaging (including the likes of WeChat and WhatsApp), as is the practice with some US airlines, with a price tag on 'full' Internet access for email and the Web.
However, to encourage return patronage by frequent flyers, Bain could adopt a 'monthly pass' approach similar to that offered by its US-based technology provider Gogo, which allows WiFi across an unlimited number of flights (as a benchmark, GoGo's subscription for Alaska Airlines, American Airlines and Delta Air Lines is US$50/month).
5. Lounges
Virgin Australia's lounges have generally sat a notch above the Qantas Club but of course well below the Qantas Business Lounge, and their value to frequent flyers can't be underestimated – even if the running costs appear on Bain's spreadsheet in boldface red type.
The Executive Traveller take: Virgin's invitation-only The Club lounges – those havens for the well-heeled and well-connected – are certainly for the chop, even if the VIP tier itself soldiers on in some form.
But larger questions over the lounge experience 'for the rest of us' remain, and are perhaps the greatest unknown in this set of puzzlers. How far can Bain cut the costs of operating these lounges, which don't realise a red cent in revenue, or is investment the answer?
Could it shift away from what's a generally underwhelming menu in favour of better-quality cafe meals with a modest price tag attached?
The shape of the Virgin 2.0 lounge experience, alongside the top Velocity Frequent Flyer tiers, will be very keenly watched in the coming months.
Also read: Here is what Bain Capital's Virgin Australia 2.0 will look like
David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.
24 Aug 2011
Total posts 1207
It is no surprise that they will move to a pay to use model similar to Air NZ and most US domestic airlines. People do accept a pay onboard model as long as the prices are not extortionate and the underlying airfare reflects the pared down offering. The same applies for checked luggage.
The Lounge model will be tweaked; probably a bit more restricted on the food side though Corona restrictions make this essential for the foreseeable future only.
It will be interesting to see what the airlines do with the space released as Virgin releases the space previously used for The Club. I assume they may try to attract third party lounge providers such as Plaza Premium for a pay-to-use offering. It is possible REX could grow into these spaces also though their current funding of $30M looks pretty lean to get a jet operation going let alone more fancy lounges.
Qantas - Qantas Frequent Flyer
07 Aug 2013
Total posts 248
As long as the airfare is cheaper then Qantas then people will buy. They know the difference between the likes of Jetstar and Qantas and virgin, so if price is all they after then virgin no reason why VA can't retain a good market share.
Personally I'd rather pay and add on for the experiences I want rather then pay a premium for an all-inclusive fare. I hardly ever have a check in bag for domestic travel and id rather not eat cheap and nasty (yes no matter what airline) food if flying economy - rather spend $20-$50 at a airport bar or cafe of pay for Lounge entry. Eating on a domestic flight isn't a necessity it's more of a novelty these days and most of the time not a nice one.
QF
11 Jul 2014
Total posts 1010
My take on this is Scurrah was a regular VA customer before getting the job, so he probably is the best person to know what customers want and don't want specially on a 60 - 90 minute flight, longer flights need different things. Hopefully they don't have one open area for all travellers but divided sections for different tiers which is also a marketing ploy for more revenue.
20 Oct 2015
Total posts 245
Scurrah was also a regular Qantas customer, he had Chairman's Lounge access! And don't forget, John Borghetti spent plenty of time flying between Sydney and Brisbane, so I would not say that any CEO is 'the best person' to know what customers do and don't want.
Virgin Australia - Velocity Rewards
24 Jan 2018
Total posts 767
Regardless, I think Scurrah's instincts were very good and he was on the right path. There's a sort of a separation between the lounge experience and the flight experience - the latter is more compressed and intensive. Perhaps it was his in-flight experiences driving his intuition (i.e. 'must do this better at Virgin')?
I'm guilty of initially thinking he was just a train driver on a different vehicle. But if he also finds a way to retain loyalty of VFF with points/travel bank balances he'll be immortalised within the Virgin empire the way John (?) Flynn was within Qantas. It's early days, and then there's the Bain factor ......
Virgin Australia - Velocity Rewards
15 May 2015
Total posts 7
Scurrah was also a member of The Club. Members of The Club were responsible for $500M in revenue through their companies choice of airline, high margin consistent revenue that would have generated much more margin than the cost of The Club
Virgin Australia - Velocity Rewards
24 Jan 2018
Total posts 767
Do you really think Borghetti EVER walked past row 2 on a scheduled flight? He wouldn't even have ANY carry-on luggage, let alone checked luggage.
His travel would have been so cocooned, swift and 'special' to accommodate that ego.
Virgin Australia - Velocity Rewards
29 Oct 2014
Total posts 3
Hard to see them continuing with Wi-Fi as anything other than paid tears. The "FREE" messaging level service is hugely costly to an airline aside from the already astronomical cost of fuel burn carrying the antenna.
19 Jun 2020
Total posts 28
what about the inflight entertainment option (via your own device) it is surprising how popular this is ,hopefully it continues - the only time I get to watch a movie.
How V2 offers up benefits for the high level FF's will determine whether I take my company business elsewhere
QF
11 Jul 2014
Total posts 1010
I always come preloaded, Mr Gadget
Virgin Australia - Velocity Rewards
24 Jan 2018
Total posts 767
To be honest, if they were to broadcast SKY News during flights I could live with that (but spare me the Nine, CNN and ABC news offerings - please). But thank God for downloads from Netflix, SBS On demand, et. al.
20 Jun 2020
Total posts 33
I hope you realise that most people consider sky news as a joke...
Virgin Australia - Velocity Rewards
24 Jan 2018
Total posts 767
I'll leave you to enjoy 'your ABC'. Happy travels, friend.
08 Feb 2018
Total posts 166
Sorry planes don't fly with only a right wing!
Virgin Australia - Velocity Rewards
24 Jan 2018
Total posts 767
I discovered House of Cards and West World on VA's in-flight entertainment system - using my own iPad. Can do without email whilst in flight (they can damn well wait until I land!).
QF
11 Jul 2014
Total posts 1010
I enjoy the quiet time, no email, no phone calls just a good movie or music videos to watch.
Qantas - Qantas Frequent Flyer
02 Apr 2017
Total posts 132
Honestly it's the main reason I fly Virgin, as on the route I fly often it's a Virgin 737 vs a Qantaslink Dash 8. On a short hop , I'm not going to spend any time preloading my device with content like I would on a longer flight.
Therefore if I can get on a plane with more entertainment than a magazine, I'll take that over the competition. Doesn't help that Qantas is slower and more expensive too.
Virgin Australia - Velocity Rewards
04 Aug 2017
Total posts 11
Will be interesting to see what changes are made in the economy space. Nickle and diming pax, especially in the baggage stakes is a revenue generator, however it doesn't bode well for customer satisfaction when your main competitor (QF) doesn't do it. Perhaps a return to the "Lite" fare of $10-15 less (but no bag) is in order?
As for onboard food, Virgin's most recent offerings in Y have been woeful to say the least. While it's nice to be able to have a snack, I wouldn't decide between QF & VA just because of that.
Virgin Australia - Velocity Rewards
24 Jan 2018
Total posts 767
Mostly agree with you. On flights of 90 minutes or less, cut out food altogether except in Business Class (where they already offer a 'proper food service'). Most folk in Eco will know to eat in the air-side food court or lounge before boarding. But offering a better selection of beverages, particularly on afternoon/evening flights, could be a revenue generator, as there's nothing like a relaxing drink to pass the time while reading or watching?
19 Jun 2020
Total posts 28
If I wanted to avoid checked baggage payment I would fly Jetstar, worrying about how heavy your bag is makes it not worth flying with that Airline and penny pinching on baggage will turn me and many others off - will be simpler to fly QF if it is made too complicated
Qantas - Qantas Frequent Flyer
07 Aug 2013
Total posts 248
I don't get the basis for your comment - no matter what airline you fly you have a baggage weight limit to adhere too - now you can't even sweetalk your way out of it as it's machine self drop off and if it's over limit it ain't being accepted. So whether you pay for it upfront, or pay it as an addition on your base fare doesn't mean you forefeit any worries about how much your bag weighs. this sort of attitude to how people spend their money thinking they getting a premium luxury service by getting all inclusive is how Qantas makes a killing of people's naivety. You can get to same place, at a lot less with same customer service (or better) and just add on a bag at $20-$30 depending on what weight you select. It's not complicated at all.
Jetstar Airways - Qantas Frequent Flyer
14 Jan 2017
Total posts 67
If you drop your bag at a manned check in the agent has the discretion to accept your bag even if it is a bit overweight.
19 Jun 2020
Total posts 28
I get 2 bags and 14kgs for carry on with Virgin and no questions asked, makes life a lot easier not worrying about weight or checked luggage for a trip of one to two nights which I do every couple of weeks. The thought of having only 7kgs and a check or an extra fee is one of those things that make me want to take my company business elsewhere this along with priority boarding and a better quality lounge makes the difference - don't care about the on board meals as even the best airline food on domestic is average and would rather not spoil my appetite for a better quality meal at my destination
Jetstar Airways - Qantas Frequent Flyer
14 Jan 2017
Total posts 67
Basically virgin will be Jetstar with some Qantas style economy offering called business class.
08 Jul 2020
Total posts 1
Yet still no word about the intentions with Velocity Rewards and its partners (Amex and M/Card).
Will complimentary flights be honoured and extended?
05 Apr 2017
Total posts 19
"Broadly speaking, Bain will generally embrace and accelerate the pre-pandemic plan of Virgin Australia CEO Paul Scurrah, which he's often described as “turning a great airline into great business."
I presume that Mr Scurrah is aware that Rod Eddington stated at the National Aviation Press Club in 1997: "Ansett is a great airline, but a poor business," he said. "We've got to turn it into a great airline and a great business."
I wish Mr Scurrah every success.
20 Oct 2015
Total posts 245
I would have to agree that making business class better value for money has to be high on Bain's list, along with adopting a simple low-cost "seat+cabin bag" economy fare. Get rid of meals on the triangle flights. I also don't mind the idea of getting rid of the low-grade 'food' in the lounges which people seem to eat just because it's free. Look, if the airfares were low enough, the airline had great reliability and it rewarded me for my loyalty as a frequent flyer then those three things which would attract me. I would be happy to use the lounge and have to pay for a meal if it was good quality and not at the usual airport rip-off prices. I'm not talking about fancy food, just poke bowls and wraps and maybe a club sandwich, some of the decent healthy things you can get at a decent food court these days. Keep the price realistic and you will instantly cut out a lot of the loss from people pigging out on free junk food.
23 Oct 2014
Total posts 238
I think the best Economy setup was the first version of the change to a FSC Virgin Australia.
1) Flexi Fare - Include Wine/Beer/Soft + Substantial Wrap/Sandwich/Pastrie + small cheese platter (one cheese, biscuits, walnut, apricot) and checked luggage and maybe lounge access.
2) getaway - Seat and checked baggage.
3) Saver - Seat only.
If Flexi was to include Lounge, maybe the Club can become the domain of Platinum members on J tickets. This may work if airports give rent to Bain on Club for a very very low lease rate.
If Flexi has no lounge, Club will go.
Virgin Australia - Velocity Rewards
24 Jan 2018
Total posts 767
Excellent suggestions ! Hope someone in the Bain mothership is reading.
19 Jun 2020
Total posts 20
The lounge option for flex fares is a great idea.
Qantas - Qantas Frequent Flyer
11 Oct 2014
Total posts 691
Of course, you are all making the assumption that Bain will be the successful purchaser ...
There's a highly interesting story moving around now about a legal challenge by two parties in the bond-holder camp. Let us just say that the Creditor's meetings (there will be two now) will be highly interesting. What will everyone think if a certain Singapore party related to SQ gets up in the courts?
By the way David, will anyone from ET be attending the Creditors meetings in an 'observer' or journo capacity?
24 Aug 2011
Total posts 1207
The bondholders are only offering $120M injection which is nowhere near enough to get the airline going again. The staff are the majority of creditors and will not vote for any program that minimises their chances of retaining a job. Realistically all the bondholders program could lead to is liquidation which means all unsecured creditors will get nothing including the bondholders.
Qantas - Qantas Frequent Flyer
11 Oct 2014
Total posts 691
@reeves35 - are you sure you haven't missed a few zeros?
From what I have read, one is offering a debt for equity swap (valued at $2 billion) along with a $1.2 billion cash injection, according to Reuters.
Qantas - Qantas Frequent Flyer
07 Aug 2013
Total posts 248
Oh you must have been reading the Financial Review. Jist understand which companies have ties with Qantas.
Qantas - Qantas Frequent Flyer
26 Feb 2020
Total posts 28
Interested in the suggestion of targeting the Business Cabin at small/medium business and self employed. This looks to be a smart strategy for not only avoiding taking QF head on, but also an opportunity to target a potentially lucrative and mobile demographic often overlooked.
Virgin Australia - Velocity Rewards
24 Jan 2018
Total posts 767
Here I am, Bain. When not flying J Class I'm ensconsed in Economy-X. And being a small business owner, I write and re-write the airline travel policy as it suits me (clients only ever get charged the Fully Flexible Economy fare, except when flying abroad).
Bain's market research need look no further than the comments on here at ET.
19 Jun 2020
Total posts 20
It has the potential to entice some QF SME travellers I think.
Qantas - Qantas Frequent Flyer
14 Sep 2016
Total posts 28
VA has never had anywhere near the equivalent Lounge's services/ beverages as Qantas - just a point in the article - this is regards to the Spirits VA Virgin Lounge has no Gin and Tonic or the like only in their “Club”
Qantas serves spirits in both Business and Qantas Club Lounge's
Which a positive... for those whom need a relax with a co worker or partner after a long business day / week and holiday time
As for flying in the plane; Virgin Domestic business class has generally always been on par with Qantas; although last year toward the end of 2019 / early 2020 having taken several business class domestic legs on both carriers and as platinum in both awards schemes; I noticed Qantas had truly lost its “award wining” wine and dining in the air; especially Domestic Business “new rules of food classifications” and what constitutes as a “meal” I flew a few times at 2-3pm slots between Mel- Bne 2 hours or so flight- on all 4 of these timed from (2-4pm) I was treated with the most revolting food! Party pies and cheese!
And note they don't “change their pricing” I have written so many complaints about this; to Qantas and nothing happens!
I am a very busy traveller between meetings and states and international travel; to not have a full meal in business class for travelers like myself whom hardly make it on time for fight almost; thus don't use the lounge or have the luxury of scoffing food in the Lounge- I prefer to do it at 35,000ft while I unwind! But to be greeted with such disgusting party pies or soup out of a steel canister is terrible!
I hope the new Covid safe boxes in business have more to offer! Albeit they are allegedly all cold service now.... having seen through youtube in flight reviews!
Miss travelling but alas more serious things to worry about.... hopefully we will all be safe soon!
Thanks for the interesting read and comments ET team!
As for VA flights I am impressed by Virgin Economy X! I do hope Qantas add this for Platinum and purchasing options! It would do so well!
That was a Borghetti tick of approval I personally feel!
And they desperately need an alliance with Star Alliance or someone! It's a joke!
Hence I prefer my Qantas P1 and Platinum any day of the week especially for all my international flying and first class perks at Lounge's
Virgin Platinum givens me nothing special you might as well just have gold with them.... or nothing from what is “planned”
Sorry VA fans; I am not a massive fan of VA; except domestic business class and “the Club” when traveling with CEO
Alas no more.....
QF
11 Jul 2014
Total posts 1010
That is amazing you think completely the opposite to what I know as the truth.
Virgin Australia - Velocity Rewards
24 Jan 2018
Total posts 767
Gee Shannonbarry51, whilst I do like a good novel for longer flights, you've delivered in spades here. A lot to process. Thanks (I think?).
05 Apr 2012
Total posts 31
My interest is in international travel. Assuming this is not going to happen anytime soon (maybe MEL-LAX in July 2021) what I would like is the ability to book international (EG with Singapore or Delta) thru Virgin & get Velocity points & status credits. What are your thoughts, David?
Virgin Australia - Velocity Rewards
24 Jan 2018
Total posts 767
Your question, Nobleoz, is also a good segue to Virgin's 31 March 2021 extension of status credits (as reported by Chris on April 3rd). With the drastic reduction of domestic services unlikely to regain near past levels until - I understand - circa June 2021, and international travel perhaps December 2021 or even into 2022, I wonder whether Bain will "look after" it's premium customers and announce a sensible extension that gives us a chance to earn and hold?
Is this a question that unreservedly must await the August creditors meeting (for reasons I can't imagine) or could it be addressed before then (and before some give up hope and pursue their earn/run rates elsewhere)? Well, Mr Bain (& Co.)?
11 Jul 2020
Total posts 75
I think the new Vigin should still include the 1 free checked bag and maybe a glass of water, so everything else apart from that can be paid for if you desire more. I listen to my music via my smartphone, so using the internet while travelling at 39,000 feet is a novelty for me, I hope they block video chat programs, just image 100 odd passengers all talking loudly as they facetime friends and family, they might have to hand out a free pair of earplugs too.
Let's be honest, most of us flew Virginblue when they first started because they made flying affordable for the masses. When they changed to Virgin Australia and went head to head with Qantas, that is when their problems started.
I'm a Boeing aircraft kind of guy and usually fly Virgin Australia domestically over the other brands. I hope they keep Economy X as I usually sit in one of those seats.
Hi Guest, join in the discussion on Five things to watch for in Bain Capital's new Virgin Australia