Five years ago and from half a world away, Sir Richard Branson watched as the battle between Qantas and Virgin Australia – then newly rebranded from Virgin Blue – reached epic and arguably out-sized proportions.
Yet it held clear echoes of an older and more familiar home-ground fight between British Airways and Virgin Atlantic, another tale of ‘incumbent versus challenger’.
“They were very very similar,” Branson told Australian Business Traveller at the launch of Virgin Australia’s Melbourne-Hong Kong route, which sees his local franchise square up against Qantas and its Oneworld frenemy Cathay Pacific.
Too high a price for competition?
Branson was struck most “by the way Qantas behaved a couple of years ago, pouring hundreds of millions of dollars” into a domestic capacity war and then asking the federal government for financial support.
Branson, whose Virgin Group retains a 10% stake in Virgin Australia, sledged Qantas for petitioning Canberra with a "begging bowl” in 2014.
“It showed just how desperate they'd got in trying to drive us out of the market place.”
“They had to go cap in hand to the government (who) quite rightly told them that it’s up to them to compete on a fair, level-playing field.”
“But the very fact that the government even considered their request worried the living daylights out of me,” Branson confessed.
“I sat up late at night in the UK helping to draft advertisements and writing letters to ministers and the Prime Minister, because some of the words that were coming out of the government were truly worrying.”
“Thank God the government didn't give them any money… if they had, I don't know whether Virgin Australia would have survived, when you’d suddenly have an airline that has become a state-sponsored company getting billions of dollars, and the smaller competitor isn’t getting that.”
The cost of the 'capacity war'
Branson says Qantas’ request for a multi-billion dollar bail-out was the airline’s own fault, after it sparked an unsustainable capacity war in rostering more flights and larger aircraft on routes which couldn't support the sudden increase in seats without ticket prices and revenue taking a dive.
The then-CEO of Qantas’ domestic arm pledged that “if a competitor puts one (plane) in, we'll put two in as a group” – and the airline went to extremes such as scheduling a Boeing 747 jumbo jet onto the Sydney-Perth route.
“It only cost them a lot of money, and it obviously cost us a lot of money,” Branson reflected.
“Finally sense prevailed and Qantas then started competing in a more normal way, on quality and on price. And that sort of competition is completely fair."
“Qantas is now making good money, which proved they did not need those billions they were asking the government for, and Virgin Australia should soon start making good money as well."
"Two great airlines is better than one"
Virgin Australia CEO John Borghetti – a 30+ year veteran of Qantas who rose from the mailroom to the executive suite before taking the helm at the airline’s arch rival – describes those days as “the capacity war we had to have.”
“I’m not taking anything away from Qantas, they're a great airline, but it’s better to have two great airlines instead of just one,” Borghetti reasons.
“And when you think back, when did Australia really have a second international carrier? Ansett was only there for a little while."
“Now we have flights from Sydney, Melbourne and Brisbane to Los Angeles, and Hong Kong is our spearhead into Asia,” Borghetti explains.
“I don’t see a situation where in three years we are not operating to Hong Kong, to two places in China and another place in Asia. I just can’t see that not happening.”
The airline has come a long way from the Virgin Blue era, “and this is a long game” Borghetti reflects. “It’s involved a lot of hard work by everyone here, but the hard work of transforming the airline has largely been done.”
“We’ve invested significantly in the transformation, and growing the company has been effectively done on debt. Our focus now is to reduce our debt and improve our gearing, and we are well on track for that.”
David Flynn travelled to Hong Kong as a guest of Virgin Australia
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.
Qantas - Qantas Frequent Flyer
18 Feb 2015
Total posts 124
Virgin will always be a low cost airline in the eyes of many Australians
Virgin Australia - Velocity Rewards
19 Jun 2017
Total posts 7
Yes, it's really tricky to shed the 'cheap' image if that's how things started. Hyundai (for example) is trying this now. Toyota - once the cheap upstart compared with GMH and Ford - has pretty much done this now. It takes decades though.
Qantas - Qantas Frequent Flyer
07 Jul 2017
Total posts 3
People see right through this. Easier to blame QF then the failings of his own management team. Poor form. Unlike QF who didn't receive a bailout in 2014, VA is only around now because high profile, foreign shareholders have poured hundreds of millions into keeping it breathing. Maybe Mr Branson ought to spend his time coming up with innovative ways to become profitable rather than slagging off QF.
Qantas - Qantas Frequent Flyer
13 Jan 2017
Total posts 74
Poor form by Branson indeed. Qantas didn't request a bailout.
31 May 2013
Total posts 28
I think the classier higher road is to acknowledge your competition and appreciate they prevent complacency and be confident in your ability to compete. Slagging out a competitor is poor form.
Qantas - Qantas Frequent Flyer
25 May 2017
Total posts 77
If Virgin wishes to release itself from the discount carrier like Jetstar they need to totally re-brand. That is change the name and enhance the product to be at least at the same level as QF or better. Then they will secure the Corproate high yeild customers
Singapore Airlines - KrisFlyer
24 Feb 2016
Total posts 18
Their Economy Class, Premium Economy and Businsss Class product is already arguably objectively superior to Qantas' (in economy and business it is undoubtably superior). What part of their product is falling short of Qantas?
Virgin Australia - Velocity Rewards Plantium
19 Jun 2013
Total posts 119
QANTAS international travel economy food / entertainment etc is far superior than Virgin. Also much prefer 13+ hours on a A380 vs 777
Virgin Australia - Velocity Rewards
07 Dec 2014
Total posts 170
No way. The config of the Virgin 777 is far superior to the Qantas A380 in both business (direct aisle access, reverse herringbone) and economy (3-3-3 seats with 18.5" width) and arguably in premium economy as well (better leg room but lack of calf rest).
Virgin Australia - Velocity Rewards Plantium
19 Jun 2013
Total posts 119
Well I flew Virgin to the USA in February and QANTAS in April and from my experience and opinion much preferred seating in QANTAS.
Qantas - Qantas Frequent Flyer
11 Jan 2017
Total posts 13
Used to be
Qantas - Qantas Frequent Flyer
05 Oct 2015
Total posts 43
How often do you actually travel internationally? Qantas is the bottom of the pile both comfort and food wise these days, though i know that the qantas social media people will combine and vote down this post the truth needs to be told that Qantas is a shadow of its former self, i travel internationally monthly to asia and europe turn about and i always wince when i see that i am on Qantas.
Virgin Australia - Velocity Rewards Plantium
19 Jun 2013
Total posts 119
I have flown 45000 miles in the last 6 weeks. Singapore Airlines, Virgin and Qantas and as I mentioned before, in my opinion I find the offering by Qantas as an international economy flyer is far better than Singapore or Virgin.
Qantas - Qantas Frequent Flyer
13 Jan 2017
Total posts 74
triumph8 - quote:"Qantas is the bottom of the pile both comfort and food wise these days".
11 Mar 2012
Total posts 314
Lounges, the lack of an alliance and no Int F for a start.
Qantas - Qantas Frequent Flyer
23 Jun 2014
Total posts 34
virgin economy class food is now terrible, has gone backwards in a big way over last 5 years. Qantas economy class food seem big improvements, though exception recently is the pulled pork and wedges, great idea is just not practical for plane flights. At least they are trying to innovate.
Qantas - Qantas Frequent Flyer
13 Jan 2017
Total posts 74
Surely langdonfm you are joking.
Qantas - Qantas Frequent Flyer
10 Dec 2014
Total posts 59
"If Virgin wishes to release itself from the discount carrier like Jetstar they need to totally re-brand. That is change the name and enhance the product to be at least at the same level as QF or better."
Qantas - Qantas Frequent Flyer Platinum
07 Feb 2013
Total posts 548
Typical example of the phrase money can't buy class
Virgin Australia - Velocity Rewards
15 Aug 2012
Total posts 171
I think Branson shot himself in the foot here. He's just highlighted that Qantas turned itself around to a profitable and competitive airline whilst considerably improving its product without any government help. Can't say what he's trying to prove here? Because it also highlights that at the same time VA hasn't been able to do the same.
Virgin Australia - Velocity Rewards Plantium
19 Jun 2013
Total posts 119
He really needs to back up his comments with facts. Yes, Virgin being in Australia does help with competition however 90% of service they provide is mostly below par. I am a Virgin Platinum and have been for many years but have started the switch over to QANTAS (just hit gold). Reasons being
09 Sep 2015
Total posts 2
Fair and level playing field...clearly he has not read the Qantas sales act...the request to the government was for a change to the act or a guarantee on debt, not a direct cash hand out...pretty weak sledge...but all is fair in love and war...
Virgin Australia - Velocity Rewards Plantium
19 Jun 2013
Total posts 119
good point - and also didn't it have something to do with foreign investment?
01 Mar 2017
Total posts 9
golden rule for me, for many years - when flying o/s, fly with the national airline of that country. examples: Taiwan = EVA Air. Indo/Bali = Garuda. Thailand - Thai Airways. UK = BA (partners with SQ) USA = hmm unsure there these days. perhaps JAL or Hawaiian. I avoid QF and VA wherever possible
Qantas - Qantas Frequent Flyer
04 Jun 2015
Total posts 70
Doesn't seem like a good rule. I think you made this up.
01 Mar 2017
Total posts 9
hey 'blingwad'. well, I guess you're entitled to your opinion. try the experience. you may change your mind. I've been flying regularly since 1972. I used to work for QF, back in the day. boom
Virgin Australia - Velocity Rewards
11 Dec 2016
Total posts 73
Talk about cheap.
Virgin Australia - Velocity Rewards
11 Dec 2016
Total posts 73
https://www.ozbargain.com.au/node/317393
Qantas - Qantas Frequent Flyer
21 Jan 2014
Total posts 320
I have a lot of criticism of QF but VA aren't exactly offering a great alternative, their domestic offering is limited and virtually follows the QF timetable anyway, they don't open new routes and services very often to create new opportunities, it's really just a me too business picking off the major routes.
Qantas - Qantas Frequent Flyer
23 Jun 2014
Total posts 34
The price war ending 2 or 3 years ago, qantas increased profits, virgin continues to make losses. Virgin product has gone backwards. Easy to blame someone else for their own management mistakes.
Qantas
02 May 2016
Total posts 63
How many times have we heard "VA is about to start turning profits".....we are still waiting, the offering is continually confusing, nothing is seamless and it seems by all the changes they don't have the trust in their strategy, sorry Richard but in this war, Alan Joyce has in the end beaten your man to a pulp, results speak for themselves and they've both been at it the same amount of time
QFF Gold QC gold
26 Nov 2012
Total posts 56
Virgin sold everything to fund their makeover. They were left with nothing to weather any storm in future. It happened with Mr Branson's blessing. I hope he's just as enthusiastic with his cheque book if Virgin ever struggles to pay the bills.
Qantas - Qantas Frequent Flyer
10 Dec 2014
Total posts 59
If they're considering new routes to Asia then I suggest MEL-BKK. Currently only Thai Airways (with variable hard product) and JetStar. Business travellers are flying SQ via Singapore or QF via Sydney.
23 Oct 2014
Total posts 238
Without Virgin enjoy $1500 one way trips to Perth in Y and one FF seat availability per city pair per day on the day your not interested in traveling, they are the facts. All that's on offer in the last 6 years is because Virgin are a competitor. Look up a route QF have a monopoly on and see if those fares look enticing to you, if not give the little guy a go.
Qantas - Qantas Frequent Flyer
07 Jul 2017
Total posts 3
1. The facts? Facts usually have evidence to back them up. I'm sure you'll be able to provide precedence of $1500 one way fares to Perth in Y?
12 May 2015
Total posts 2
I've always seen Virgin as a competitor to Qantas and usually split my domestic travel between both.
16 Dec 2016
Total posts 58
Hilarious Virgin tactic to blame someone else for their terrible strategy. Also hypocritical for them to comment on QF asking for money from the Government when the only reason they aren't bankrupt is because of their cash injections by foreign carriers. Qantas doesn't have that option! Anyway just a silly move by Branson to shine a light on their superior competitor.
Virgin Australia - Velocity Rewards
03 Aug 2016
Total posts 3
If you travel to Europe, Virgin and way more expensive than Qantas
Qantas - Qantas Frequent Flyer - Chairmans Lounge
01 Sep 2011
Total posts 416
Branson has always been a "poor me/us" person, when/if he talks about competition. They couldn't sustain Virgin Atlantic flying all the way to Australia via HKG.
Qantas - Qantas Frequent Flyer
10 Apr 2012
Total posts 317
Im fairly sure Virgin started the capacity war too out of spite and found out they started a war they couldn't win...
29 Jan 2012
Total posts 182
History has shown Virgin will always be the underdog to Qantas, but Qantas needs the competition to stay straight. Virgin does need to re-brand - just look at the overseas Virgin branded airlines - all seen as discount carriers. Virgin America was recently sold to Alaskan, which shows its position. Virgin needs to not only rebrand, but to also mature its product and show professionalism and only then they will start to fly!
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