Virgin Blue have two very fundamental problems which are obvious I know. Firstly we just couldn't resist trying to add "value" to our product and thus increase our cost base. In doing so we have gone from an initially good "Southwest" replica to yet another "Southwest wannabe" with the only consolation there being that there is a bit more fresh air on top of that heap than at the bottom where so many have fallen before us.
VB should have been in a position to shut out a Jetstar like competitior but instead they may as well have sent out invitations to slam doors in our face.
The second obvious problem is fuel hedging. The board took a high risk 'guess' that fuel would not go much higher than it was a year ago and except for actually getting into the airline business the business of flying airplanes should be treated as a low risk take no chances business. A year ago
VB could make money when fuel was fifty bucks a barrel. Today it is trying to convince pilots that we are on average carrying 58kg of fuel per sector to much and thus encouraging more "dilligent" fuel management. Like its our fault somehow that fuel expenses are getting a bit out of hand. Better they hedged at fifty bucks a barrel and watched it drop to forty again than scoff at the chances of significant further increases. Fuel price and fuel price alone has shut down bigger and more sophisticated airlines.
Now Jetstar International. There should have been a big red shiny new widebody on the ramp in Cairns (just for effect) and eventually MEL or SYD the day Australian Airlines started service. There is a market for low cost international airlines and this one was more or less on a platter. The invitations have gone out again and
VB may just well be cleaning up after that party as well.
Unfortunately when airlines become stock market volley ball's the stabilty of the airline and it success erode. The one thing still in favour is
VB's size and relative security as the second carrier in Oz in terms of size. However if someone with this airline in its interest doesn't buy in and settle it at one end of the market or the other then it will end up on another bigger heap than the low cost heap, namely the has- been heap.