Low-cost Virgin Blue transforms into a full-service airline

In a bid to become a more powerful, direct competitor to Qantas, Australia’s Virgin Blue is transforming itself from a cheerful low-cost carrier into a full-service business and leisure airline with a low cost base. With the remake, Virgin Blue wants to double its share of Australia’s corporate travel market from 10 to 20 percent and cut its reliance on leisure travel in the process, as competition from other low-cost airlines, such as Jetstar (part of Qantas) and Tiger (50% owned by Singapore Airlines), is driving down leisure fares. Virgin Blue’s earlier attempts to target the business market, with for example a premium economy class, has left the airline somewhat stuck in the middle. 

Strategic repositioning
As part of what Virgin Blue has dubbed a ‘Game Change Program’, the airline has recently announced a series of initiatives that seriously upgrades its product. As Australian Business Traveller nicely summarizes it: “There’s a seismic shift happening at Virgin Blue. A new name, new logo and new brand. New planes with new livery. New business class seats, new cabins and new lounges. New routes. New alliances with partner airlines. New uniforms”. The catalyst for the changes at Virgin Blue has been the appointment in May 2010 of John Borghetti, formerly Qantas’ executive general manager. 

First of all, Virgin Blue will reveil a new brand name by June 2011, which is expected to be either Virgin Australia or V Australia. The airline’s creative director Hans Hulsbosch recently told The Australian that while the Virgin brand would continue to anchor the airline, Blue would no longer be part of the brand. Research has found that as Virgin moved to capture the business-class market, its brand was being held back by perceptions among business travelers that it was purely a budget airline. Furthermore, Virgin Blue wants to consolidate its fragmented brands – Virgin Blue, Pacific Blue, Polynesian Blue and V Australia – which is the result of an agreement between Virgin Atlantic and Singapore Airlines (which owns 49 percent of Virgin Atlantic) that prevents the Virgin brand being used outside Australia. 

New uniforms
Virgin Blue’s new uniforms perhaps best illustrates the airline’s transformation from a cheerful low-cost airline into a full-service carrier targetting business travellers. Created by Project Runway Australia winner Juli Grbac, the new red, silver and purple unifoms are remarkably reminiscent of Virgin Atlantic’s chic and classy style, and replace Virgin Blue’s current more casual outfit

Business travellers
To position Virgin Blue for a head-to-head battle with Qantas for a significant stake in the Australian business passenger market, Virgin Blue will introduce A330 widebody aircraft on domestic trans-continental trunk routes, starting with Sydney to Perth in May 2011. The A330s, which Virgin Blue obtained from Emirates, will feature a full business class product, a first for Virgin Blue. Although the seat is not lie-flat, it offers a deep recline, a seat pitch of 62 inches, and they are made of luxury leather. During 2011, Virgin Blue will also introduce a similar business class seat on its 737-800s (the first of 50 new 737s on order will arrive in June 2011) although with a smaller pitch. 

Virgin Blue will also open three new domestic lounges by the end of April 2011, with the flagship Sydney lounge gaining valet parking and ‘direct entry’ into the airport with its own private security channel. Virgin Blue has signed award-winning Australian chef Luke Mangan to oversee inflight meals as well as catering at the new lounges. 

Meanwhile, Qantas has already responded to Virgin Blue’s aspirations by announcing  it will introduce B747s on Australia’s domestic East-West route. The Qantas jumbo’s are normally used for international operations and for example offer full-flat SkyBed seats in Business Class. A Qantas spokesman said the 747’s were not being pulled from international routes, but would be put into service domestically at times they would otherwise be idle on the ground. Furthermore, Qantas will remove the much-criticised middle seat in business class on its domestic A330s. 

Network overhaul
Virgin Blue has also overhauled its international network which has lost its focus. In April 2010,  the airline announced an alliance with Air New Zealand on the trans-Tasman route between Australia and New Zealand and pulled out of the domestic New Zealand market. Air New Zealand also recently increased it stake in Virgin Blue to 14.9 percent. 

Furthermore, Virgin Blue has drastically reduced the number of routes of its long-haul arm V Australia to just two intercontinental hubs – Abu Dhabi and Los Angeles – and will code-share  with respectively Etihad and Delta on these routes and for connecting flights. On 24 February 2011, V Australia made its inaugural flight to Abu Dhabi, while the proposed alliance with Delta still has to gain regulatory approval. Virgin Blue also has its eye on a similar alliance with an Asian airline, as it builds what it calls a ‘virtual international network’. Says the airline’s CEO Borghetti, “Our international strategy recognises that it is impossible for any airline based at this end of the world to offer a global network on its own.” […] “If you have the right alliances and partnerships you can offer hundreds of destinations with just a small fleet of international aircraft.” 

For more on Virgin Blue’s plans we recommend Australian Business Traveller’s excellent “Virgin Blue gears up for the new Blue.” 

Related articles:
Low-cost carrier Virgin Blue transforms itself into a full-service airline, with lower costs
Air New Zealand goes single class on short-haul routes and radically rebundles fares
Qantas unveils ‘next generation’ check-in for its frequent flyers


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