Virgin LCC to replace Tiger?
 

An interesting opinion appeared in yesterday's Australian newspaper:

Virgin poised to take bite of Tiger's market | The Australian

Nabila Ahmed claims that given VA's new partnership with SIA, and the woes Tiger Airways has experienced, that:

This is the first time I've heard such VA strategy discussed, and I have my doubts about Nabila's understanding of aviation business. However, if such a thought was serious I don't believe such a strategy would work.

VA seem to be getting the balance of service and low fares right, ensuring leisure and business travellers can enjoy the ride. Setting up a Virgin LCC beneath the current airline would not work. What started off as a strategy to see off Virgin Blue, Jetstar has evolved into an egotistic juggernaut canabilising mainline QF domestically and internationally. Jetstar was a rare example of a successful dual strategy (spilting cost leadership and differentiation i.e. service, across two group airlines), but in recent years many observers doubt this will long-term be the right strategy for the QF group. I'm sure in 10 years time academics will be writing papers about the demise of Qantas and state that supporting the growth of Jetstar above all other corporate tactics is what wrecked QF.

Sure, establishing a new Virgin airline would allow a lower cost base. Tickets could be offered at a lower price, increasing the market in some respects, but would ultimately eat away at their existing market. I doubt Borghetti wants to go down this path. Even if there was a business case for it, I'd imagine a small part of Borghetti hates extreme LCCs after Joyce destroyed his previous empire.

Wow, log back on 11 hours later and no reply. I guess this forum really is only interested in Qantas or Joyce bashing...

YEP!!!!!!!!!!!!!!

It wont happen....

What, a reply to this thread or a Virgin lower cost carrier? :}

How? You pay the same for aircraft, fuel, landing fees, the pilots already pay for their endorsements in Virgin anyway, passengers pay for food already.... there are not many areas to actually save anything other than labour. You can save money by being small and simple but once you grow the business then you just run into all the same problems all over again.

Given that Jetstar is severely propped up by QF I would hardly call them a successful LCC. Ryanair, Southwest, Easyjet have managed to make it work independently and from scratch. Jetstar is the vehicle that QF management used to destroy the high labour costs in QF.....nothing else.

Operating costs would be similar, but establishing a new business unit would allow a slimmer organisational structure in comparison to the original group. Staffing costs could be lower as employment packages would be less than the existing VA packages. 'New' airline, 'new' EBA for the pilots. Hopefully they'd set up the new business properly and not use smoke and mirrors like QF/JQ do.

Offer absolutely no frills, therefore lowering costs yet again. Fly only one type again (say, the 737-NG) in the new LCC, therefore maintenance, training etc costs would be reduced. Overall, Virgin Australia does not have the lowest cost base, hence their move away from the middle ground and towards a differentiation strategy.

I hope they don't go down this path because of the reasons given in the first post. Secondly, lowering conditions affects everyone in the industry and personally I'm sick of seeing this happen.

LCCs are on the wane. When the concept was introduced they numbered in their hundreds worldwide, there's 30 odd left. Premium carriers have changed their product to adapt by offering similar unbundled ticket prices but on airplanes that also carry premium passengers. QF should probably have done this as it would have prevented their offspring devouring it's mother and sustained what is left of the QF premium service culture. BA went down the same route but sold off its LCC before it too made the parent company irrelevant. VA will offer competitive tickets to leisure travellers at a price that the company can sustain industry standard ops.

ThePaperBoy

In one post you're saying:

Then two posts later you're basically saying how you think it would work:

You also said, and in the same post . So, do you hope they set up one properly? Or hope they don't go down that path?

These posts just seem a little irrational, all over the place and just a rehash of all the information that is posted all over these forums every day with not much more information or substance. You even reposted on your own thread when no one initially replied. Maybe there was a reason for that?

Virgin is one of several airlines that started as LCC but have evolved into 'new age carriers.' Lower cost base still than traditional airlines and offer more than a LCC would. To start another carrier (a super LCC if you will), makes little sense when you consider entry level fares without extra trappings are still fairly low and you also have the benefit of a product on offer that is designed to attract higher yielding customers.

Start an ultra LCC!

I think you'd sooner see JB buying 'off the rack' suits. :E

possibly the worst article i've read.

she takes the cake from creedy.

I think she should quit writing about aviation while she is already well already behind.:ugh::ugh::ugh:

Dragun,

Cut and quote what you like, but re-read, have a think and you'll see my belief is:

• A new business unit would result in a lower cost base, however;
• It would canabalise VA's existing marketshare, much like JQ has done to QF in recent years

Explaining how costs would be reduced was in reply to neville's comment that it couldn't be done. It is a fact new entrants can establish a lower cost base (if that is their entended strategy) - think Virgin -> Jetstar -> Tiger. Sure, a Virgin LCC could benefit from this, but what would be the effect on revenue and therefore profits across the whole group? We all know the answer.

Me saying "hopefully they'd (they would) set the business up properly" was followed by "and not use smoke and mirrors like QF/JQ do". It's also a case of saying "they would" vs. "they will". I'm not hoping it is set up at all, but if they did go ahead I was explaining I'd hope they would avoid hiding all the costs and profits from shareholders like the other team continue to do.

I was hoping for a thread about something non-Qantas related and a discussion about strategy that went a little deeper than the Joyce bashing you read in every second post. I also wanted to point out the rubbish that was published in the Australian newspaper about the whole thing.

Play the ball, not the man.

Won't happen on Il Duce's watch. After that? Anything is possible. But if you had followed interviews and press meetings he has spoken at, you would know where he stands on the whole QF/Jetstar type thing.