Virgin Australia to axe Melbourne-Hong Kong flights
Virgin Australia says it will 'suspend' flights between Melbourne and Hong Kong in favour of the new Brisbane-Tokyo service.
By David Flynn, November 6 2019
Virgin Australia will axe its daily flights between Melbourne and Hong Kong in February 2020 as part of a broad program to bring the airline back to profitability in the wake of seven straight years of losses adding up to $1.9 billion.
Also on the cut list:
- Canberra-Perth flights will cease from 6 December 2019
- Gold Coast-Perth flights will end on 19 January 2020
- Sydney-Christchurch flights are being dropped as of 29 April 2020
- reducing regional Sydney-Tamworth flights from a double-daily frequency to six services per week
- trimming Auckland-Sydney "from up to 19 return services to 14 services per week"
But it's not all slash-and-burn: dropping the Melbourne-Hong Kong service will free up the necessary Airbus A330 aircraft required for Virgin's launch of daily flights between Brisbane and Tokyo in March 2020.
"Flying to the right destinations, with the right customer demand, and the right sized fleet will improve our financial performance," said Virgin Australia CEO Paul Scurrah ahead of today's annual general meeting of the airline, his first since being appointed as CEO in March 2019.
Today's announcements follow a sweeping six-month review initiated by Scurrah to "right-size" the beleaguered airline "to meet current and forecast market demand conditions."
Scurrah's first moves included pushing back the arrival of new Boeing 737 MAX jets from November 2019 to July 2021 to delay a $1 billion delivery bill, and scuppering the launch of an improved Boeing 737 business class touted by previous CEO John Borghetti, whose eight-year tenure as CEO saw the airline reshaped from the low-cost Virgin Blue to a full-throated Qantas competitor in Virgin Australia.
Virgin Australia most recently posted a $315 million loss for the 2018-2019 financial year, although this was half the $653 million loss of FY18.
“We maintain a strong network of destinations and it’s important that our schedule continues to reflect demand from our business and leisure customers," Scurrah noted. "Some of today’s changes respond to shifting demand on some routes, and others are about refocussing Virgin Australia and Tigerair Australia on the destinations we feel they are best suited."
Asian pivot: from China to Japan
Virgin began flying between Melbourne and Hong Kong in July 2017, with the launch of Sydney-Hong Kong following in July 2018.
From the outset Virgin was elbowing its way into crowded markets dominated by Qantas and Cathay Pacific, with the latter offering not only multiple flights each day but a raft of onwards connections to Europe and the Americas, along with other parts of Asia.
The recent months of protests and political unrest in Hong Kong have impacted all airlines flying to the Asian metropolis but exacted a heavy toll on Virgin which is believed to have been facing relatively low patronage on the competitive route.
Scurrah said the Melbourne-Hong Kong route "has continued to underperform in line with the political landscape and we feel it’s best served through Sydney."
Former CEO John Borghetti saw Hong Kong Kong as the start of a determined and deliberate push into China, and in mid-2017 affirmed that "by the end of 2018 we will be in mainland China," with aim of eventually opening two routes to mainland China to take advantage of carriers owned by or affiliated to Virgin stakeholder HNA.
Scurrah remains confident of Asia's place on the airline's route map, but sees the pivot to Japan as being more sustainable, especially as it is underpinned by a new partnership with ANA offering codeshare flights and reciprocal points earning and lounge access.
Resuming full ownership of Velocity
Virgin has also confirmed plans to reclaim full ownership of its Velocity Frequent Flyer scheme by purchasing the 35% stake of Affinity Equity Partners, which bought into the program in 2014 for A$335 million. The buyback is estimated to cost $700 million, which would see Velocity valued in total at around A$2 billion.
"We're thrilled to buy back the Velocity business and bring it back under the airline," Scurrah said. "Velocity, with its 10 million members, is a very important part of our future."
The decision demonstrates Scurrah's confidence in the longer-term proposition for Virgin Australia and growing Velocity as part of that future. Loyalty programs are usually a pillar of strength for airlines – in the 2018-2019 financial year Velocity reported pre-tax earnings of A$122.2 million (up 12% over the previous year).
Velocity members were also wary of sell-off plans, fearing that the program's core benefits – especially when it comes to the earn-and-burn equation and redeeming points for seats – might slowly be watered down by non-airline stakeholders.
Scurrah said the buy-back "allows us to move from a very successful member acquisition phase to one focused on improving the engagement and earnings quality of those members."
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.
15 Mar 2017
Total posts 15
This is great news. Does the ANA partnership only apply internal Japan flights?
If not and applies to other international flights, this is a cool one stop to Europe and East Coast North America.
Virgin Australia - Velocity Rewards
13 Jul 2019
Total posts 1
Unfortunately the loss of one of the HK services was always on the cards particularly once they got the approvals for Haneda. Having flown into HK yesterday on VA83 I can say HKIA was very quiet so can well understand VA and others reviewing their operations in this market.
Qantas - Qantas Frequent Flyer
09 Jun 2011
Total posts 88
latter not later “... with the later offering ...”
10 Dec 2018
Total posts 40
Appears to have been fixed but good to see at least one other person on the planet finds 'spotty' written grammar irritating (although I suspect was probably autocorrect and poor proof reading in this case). Can't quite understand the plethora (look it up) of 'red arrow downers' that generally shower down on anyone who has the temerity (look it up) to 'complain'. Today's 'writ' and 'spuck' language is degenerating toward a series of grunts and 'all back into the trees' quite fast enough without encouraging the move by way of lack of criticism. Guessing that the red arrows are a badge of personal achievement.
Qantas - Qantas Frequent Flyer
18 Feb 2015
Total posts 124
Typical VA... watch them pull out of Tokyo in 18 months as well!
07 Feb 2018
Total posts 21
Agree 100%, I have been saying this out loud for weeks, just a new dart thrower in charge of Virgin, you know, let's try this and see if it works, then, oh whoops, let's see what else we can do, just a shambles
Qantas - Qantas Frequent Flyer
20 Mar 2012
Total posts 233
All his decisions so far seem very rational and well constructed. What leads you to think this?
30 Aug 2019
Total posts 28
Tonym, your continuous Virgin bashing is getting old. Move on please.
I agree with FrequentFlyer, every single decision that Paul Scurrah has made thus far seems logical and rational, unlike your comments across a number of Virgin articles.
I hope that Virgin does succeed as having Qantas as the sole airline in this country would be good for noone.
07 Feb 2018
Total posts 21
Ja90ck, I'm not “Virgin bashing “, I am merely noting my opinion as one does on a forum, as you or anyone else may too. Just because my opinion does not align with yours does not give you any entitlement to ask me to suppress my comments. I don't like Virgins way of doing business and I am merely voicing that opinion. I am amazed from a commercial perspective at their stunning ineptitude and they are lucky they've got shareholders with deep pockets. As opposed to Qantas that has been hamstrung by the Qantas Sale Act since Keating sold the airline to pay a current budget deficit way back!
30 Aug 2019
Total posts 28
Opinion (n): a view or judgement formed about something, not necessarily based on fact or knowledge.
I guess if there was some sort of justification, facts or reasoning behind the comments you make, I would be more tolerant and understanding, however without stating why, it comes across as bashing.
You are correct, you are entitled to your opinion and to voice them here, but I am of the belief that they are getting a bit long in the tooth now.
Qantas - Qantas Frequent Flyer
18 Feb 2015
Total posts 124
VA should pull out of all international, they cant do it and make any money... stick to Domestic where they can make money. And they really aren't needed there is plenty of international competition.
Qantas - Qantas Frequent Flyer
04 Nov 2017
Total posts 345
You don't cut the few routes that actually do make money, which is the LAX 777 operations. LAX was singled out as one of the few (if not only) routes that actually made money for VA, in conjunction with the DL partnership.
If anything, if the ownership situation is to be cleared up, DL and/or NH would seem better equity managers than the failures that are EY, HNA and SQ.
22 Jan 2018
Total posts 99
Thank you! I also got red arrow'ed when I made a similar remark
Qantas - Qantas Frequent Flyer
25 May 2017
Total posts 77
Interesting comment We have a very attractive business to the corporate sector which we will continue to focus on," Scurrah noted - Given that VA have alienated high yield traffic compared to QF. Just look at the lounges, VA are a glorified bus lounge let alone no recognition for Platinum members like QF offer domestic business lounges. To add further the diminished relationship with SQ as a points transfer partner has further added to the case that VA is not much better than a glorified JQ
Qantas - Qantas Frequent Flyer
13 Jul 2012
Total posts 118
VA offers it business class passengers excellent international lounges in both Sydney and Melbourne. These are much better than QF business.
BA, for instance, dumped terrible QF business lounges in favour of The House.
20 Oct 2015
Total posts 245
No surprise here, although maybe a toss of the coin on SYD vs MEL to get the axe. Let's hope that Tokyo is more successful, at the moment Virgin will only be competing head to head with Qantas and offering a better airport (HND vs NRT) with better domestic connectivity.
25 Oct 2019
Total posts 2
"Virgin to launch Melbourne-Hong Kong flights to bring airline back to profitability"
"Virgin to axe Melbourne-Hong Kong flights to bring airline back to profitability"
"Virgin to launch Brisbane-Tokyo flights to bring airline back to profitability"
...
I'll wait for the inevitable announcement in 18-24 months. Unfortunately, new routes won't save VA. Their issues are much broader and more entrenched.
Virgin Australia - Velocity Rewards
24 Jan 2018
Total posts 766
Yeah? Please explain .... I'm keen to hear your concerns.
Qantas - Qantas Frequent Flyer
12 Jun 2011
Total posts 148
Making money from their core business and not continually spending money without a ROI is a good start.
Lauching new routes and products is costly, particularly when they don't have the revenue streams needed to support them (particularly over such a long period).
01 May 2018
Total posts 10
Any idea how existing award bookings for post Feb 2020 will be dealt with? I would expect free cancellation or free routing via Sydney?
Qantas - Qantas Frequent Flyer
16 Jun 2011
Total posts 70
They are the options being made available to revenue tickets, so would probably be the same deal for award bookings.
QF
11 Jul 2014
Total posts 1007
Gees I hope they don't do that Qantas thing, book a Virgin flight and you end up on Tiger.
Qantas - Qantas Frequent Flyer
30 May 2013
Total posts 381
I'm not sure why people think this happens. It's always pretty obvious if you've booked a Jetstar codeshare flight with Qantas. I don't think a lot of people take much notice of their flight number or "service operated by" section on their booking.
QF
11 Jul 2014
Total posts 1007
The problem is the reliability of Jetstar, you try and give loyalty to one airline to build up status credits and then as a business traveller you get put on a budget carrier that is hopeless with time management. You miss appointments which then decreases productivity, the amount of people I talk to that tell me this is the reason they have moved away from Qantas.
Qantas - Qantas Frequent Flyer
12 Jun 2011
Total posts 148
If they checked they had booked a flight on JQ and not on QF, that'd be the first thing to solve the issue. If the appointment was so important, then perhaps they need to be more careful with the airline they'd be flying with.
19 Sep 2017
Total posts 10
Have a booking with VA on BNE-MEL-HKG rt in Feb/Mar. it's unacceptable to be rerouted via SYD. 95mins dom-intl transfer in SYD is too rush! No time for TRS or the HOUSE! Wondering if VA will rebook me on SQ flights, of course with the VA codeshare flight number(100% tire bonus is quite a lot different!)
Qantas - Qantas Frequent Flyer
12 Jun 2011
Total posts 148
Hahaha, good luck getting them to book you on SQ.
Its possible to get a 2hr 10min transfer BNE-SYD-HKG....
19 Sep 2017
Total posts 10
Unfortunately it fortunately, the earliest flight bne-syd on my day is 0600-0835.
Virgin Australia - Velocity Rewards
11 Dec 2016
Total posts 73
It's highly logical that VA will change the timing for the syd-hkg flight where possible. Maybe the mel - hkg timing will be more appropriate.
Virgin Australia - Velocity Rewards
07 Dec 2014
Total posts 170
The Melbourne flight arrives an hour later ... which means if the Sydney flight moved into the slot it would be a ~6.5h connection to the Virgin Atlantic flight to London against the current ~7.5h ... assuming that is an important consideration?
I wonder if Hong Kong slots have opened up given the situation in the city?
28 Jan 2016
Total posts 3
Yeah, nah!
We have just been through this with VA when they first reduced frequency ex SYD and we were forced to fly via MEL. Then several weeks ago they pulled the same trick again with further reductions and our outbound leg was now also via MEL.
This added 8 odd hours to the trip and wasted most of day on the return leg.
It was a case of accept the changes or take the refund. They were adamant that they would not move us to another carrier as they had done all they were legally required to do - they provided alternative flights.
We took the money and rebooked on QF with a near identical flight schedule, albeit at an additional cost.
They made no friends with me.
Delta Air Lines - SkyMiles
14 Apr 2013
Total posts 325
This is interesting. Especially the NZ services. It will make for an interesting view on fares
16 Nov 2018
Total posts 26
Sad but good move, hopefully.
1, Unrest city.
2, Troubled HK Airlines, axing North America routes next year.
3, Troubled Hainan Group. Lending out new A350s. Over capacity on wide bodies.
4, More and more direct flights from Aus to smaller cities in China.
Too many reasons to let go HK.
06 Nov 2019
Total posts 1
Hi
How soon will Virgin accept bookings wish to fly Tokyo to Brisbane Business class on the 23rd July 2020. Is there anyway of being informed as soon as flight details are available.
Virgin Australia - Velocity Rewards
11 Dec 2016
Total posts 73
This isn't the Virgin helpdesk. Try calling them instead to ask if the info isn't available online.
Qantas - Qantas Frequent Flyer
20 Aug 2014
Total posts 168
I expected a lot more cuts/reductions than this. Surely these few aren't the only unprofitable routes that needed adjustment? Is there more to be announced?
Qantas - Qantas Frequent Flyer
30 May 2013
Total posts 381
I thought the same thing. As a Tasmanian, I'm pleased to see that Virgin's HBA-PER and Tigerair's HBA-OOL services have survived the chopping block, for now.
Qantas - Qantas Frequent Flyer - Chairmans Lounge
01 Sep 2011
Total posts 416
When did virgin last have any sort of profit and how can a business operate with losses year after year after year after...
Qantas - Qantas Frequent Flyer
30 May 2013
Total posts 381
I agree. The resemblance to Ansett's final years is scary.
09 Jun 2017
Total posts 30
Virgin, goodbye and good luck. Not looking good sorry. I tried for 5 years to be loyal but not anything new or exciting to keep me there.....
Qantas - Qantas Frequent Flyer
02 Sep 2018
Total posts 153
Does Qantas have anything new and exciting to keep you loyal?
07 Feb 2018
Total posts 21
A new Dreamliner a couple of weeks ago, another one in a couple of weeks and so on........
01 Nov 2018
Total posts 81
Time for the CEO to step down I reckon, obviously he's not performing and neither is his Airline that's he's managing.
Virgin Australia - Velocity Rewards
10 Jan 2012
Total posts 258
The CEO who was managing the airline while it was not performing has already stepped down. The new CEO is now making changes to help the airline perform better.
QF
11 Jul 2014
Total posts 1007
All this negativity, how about we all just think what it would be like with just one Australian carrier instead of two.
Qantas - Qantas Frequent Flyer
12 Jun 2011
Total posts 148
Lol, calm down, that's never happening. All that will happen is someone else will set up another airline.
Virgin Australia - Velocity Rewards
07 Dec 2014
Total posts 170
Presumably Virgin knows which of their Hong Kong flights is more popular/profitable. As a Sydney resident, glad they are keeping Sydney.
Worth noting, per the 2016 census ... 40,000 Sydney residents born in Hong Kong vs 20,000 Melbourne residents. Similarly, 225,000 Sydney residents born in China vs 155,000 Melbourne residents. So in terms of expat market, would seem Sydney is going to be better base for Hong Kong flights.
11 Dec 2015
Total posts 85
Add to that, with the current troubles in HK I imagine more than a few people heading to London who might have used VA's service might now try for MEL-PER-LON with Qantas, an alternative that's not available from Sydney.
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