Category Archives: Virgin Australia

Virgin Australia resets as a Boeing 737 operator, Tigerair Australia brand closed down

Virgin Australia Group has made this announcement:

Key points:

• Plan for a stronger, more profitable and competitive Virgin Australia coming out of voluntary administration
• Focus on delivering exceptional experiences at great value with Virgin Australia’s core domestic and short-haul international business
• Virgin Australia to provide customers with the value of travel credits post administration with validity dates extended for bookings made prior to administration
• Resetting Virgin Australia to meet lower global and Australian demand, including:
– Reduction in cost base to meet sector uncertainty and COVID-19 market conditions
– Securing approximately 6,000 jobs when the market recovers with 3,000 roles impacted
– Simplified all-Boeing 737 mainline fleet and the retention of the regional and charter fleet, but removing ATR, Boeing 777, Airbus A330 and Tigerair Airbus A320 aircraft types.
Long-haul international flying important part of plan but suspended until global travel market recovers
Tigerair Australia brand discontinued with Air Operator Certificate (AOC) retained to provide option for ultra-low-cost operations when market recovers.
– Continued commitment to regional and charter flying.

The Virgin Australia Group has announced a plan for a stronger, more profitable and competitive business, building on its unique culture and securing approximately 6000 jobs as it prepares to exit voluntary administration under the ownership of Bain Capital.

CEO COMMENTARY

Virgin Australia Group CEO and Managing Director Paul Scurrah said together with Bain Capital, the plan will help to re-establish Virgin Australia as an iconic Australian airline, bringing strong competition for travellers while securing approximately 6,000 direct jobs and indirect employment for more than 30,000 Australians.

“Our aviation and tourism sectors face continued uncertainty in the face of COVID-19 with many Australian airports recording passenger numbers less than three per cent of last year and ongoing changes to government travel restrictions,” said Mr Scurrah.

“Demand for domestic and short-haul international travel is likely to take at least three years to return to pre-COVID-19 levels, with the real chance it could be longer, which means as a business we must make changes to ensure the Virgin Australia Group is successful in this new world.

“In a country as big as Australia, strong competitive airlines are critical in helping restore the economy, which is why in the face of the worst crisis our industry has ever seen, a well-capitalised Virgin Australia Group with a solid and sustainable future is a great outcome for Australians and the nation’s economy.

“Even when we do see a return to pre-COVID-19 levels of travel, successful airlines will be influenced by demand and look very different than the way they did previously, requiring long-term capital, a lower cost base and be more focused on providing exceptional experiences through a combination of great people and world class technologies.

“Working with Bain Capital, we will accelerate our plan to deliver a strong future in a challenging domestic and global aviation market. We believe that over time we can set the foundations to grow Virgin Australia again and re-employ many of the highly skilled Virgin Australia team.

“Our initial focus will be on investing in the core Virgin Australia domestic and short-haul international operation alongside our 10-million-member strong Velocity Frequent Flyer program, continuing to offer an extensive network of destinations, a domestic lounge network and value for money for customers.

“Bain Capital recognises the importance of Virgin Australia’s loyal customers, and that’s why they will be provided the value of their travel credits post administration with validity significantly extended to ensure they have plenty of opportunity to book tickets to their favourite destinations.

“While these changes are important to manage the impact of COVID-19, they involve some very tough decisions. We expect approximately 3,000 roles will be impacted as a result of the changes announced today. However, our intention is to secure approximately 6,000 jobs when the market recovers with aspirations for up to 8,000 in the future. To those that leave the business, I want to thank them for the role they’ve played in making this a great airline. They will be closely supported through our alumni program, have all their entitlements honoured and be provided with a two-year extension of employee travel benefits and early access to retiree and long service benefits.

“Our people have shown incredible resilience under tough circumstances. They are what set the Virgin Australia Group apart and make us so unique. We hope to welcome many of them back as we start to grow again in the future.

“Virgin Australia has been a challenger in the Australian market for 20 years, and as a result of this plan and the investment of Bain Capital we are going to be in a much stronger position to continue that legacy.”

PLAN FOR A STRONGER VIRGIN AUSTRALIA GROUP

The plan is anchored around six key points:

1. Overhaul the cost base, and simplify everything, starting with the fleet

To build a successful airline, the Group will align costs with a depressed and uncertain revenue outlook, simplifying its fleet to realise cost efficiencies and remove operational complexity.

The Group will move to an all-Boeing 737 mainline fleet for domestic and short haul operations which will see the removal of ATR, Boeing 777, Airbus A330 and Tigerair Airbus A320 aircraft.

The Group’s regional and charter fleet will remain, while the company reviews options at Virgin Australia Regional Airlines (VARA), including different operating models to support continued regional and charter flying.

The Group will also undertake a supplier contract review across its operations including products, services and facilities to better align with the company’s future size and requirements and lowering costs significantly.

Virgin Australia will consolidate its footprint and will move its corporate headquarters to 275 Grey Street in Brisbane’s Southbank. This follows a consolidation of its corporate offices in Sydney.

Long-haul international operations are an important part of the Virgin Australia business. However, given current international travel restrictions, the airline will continue to suspend flights to Los Angeles and Tokyo with the intention to recommence and grow long-haul flights when sufficient demand returns. Customers will continue to have access to international markets through the airline’s codeshare partners.

The Tigerair brand will be discontinued in the market as there is not sufficient customer demand to support two carriers at this time. Tigerair Australia’s Air Operator Certificate (AOC) will be retained to support optionality to operate an ultra-low-cost carrier in the future when the domestic market can support it.

Note: Tigerair Australia suspended operations on March 25, 2020.

2. Focus on customer value

Virgin Australia aims to be the best value carrier in the market, not a low-cost carrier. It will offer exceptional experiences at great value, regardless of purpose of travel. The airline will serve business travellers, including corporates and customers travelling for a holiday and visiting loved ones, and maintain a two-class cabin offering.

Virgin Australia will continue to offer choice and convenience through an extensive network of domestic and short-haul international destinations including frequent capital city connections and services to leisure and regional markets as part of the company’s future network plans. Virgin Australia will also maintain a network of lounges in key domestic locations with a plan to re-open when demand returns.

Virgin Australia currently operates a reduced network of services to 28 towns and cities across Australia and will continue to add destinations and frequencies in line with demand and to support the nation’s economic recovery from COVID-19.

Virgin Australia will continue to focus on delivering the best on-time performance and maintain an exceptional safety record and safety culture.

In response to COVID-19, Virgin Australia has introduced a range of health and wellbeing measures including a pre-departure eligibility questionnaire, contactless check-in, expanded social distancing measures, and more frequent cleaning onboard and at the airport.

3. Harness culture

The Group’s culture is unique and is the heart and soul of both the airline and Velocity Frequent Flyer. Over the past 12 months, the Group has gone to great lengths to unlock its culture and harness the spirit of its people. The Group will continue to reinvigorate the Virgin Australia brand and its passion for customer service, while embracing the diversity, talent and strength of its people.

4. Investment in world class digital and data technologies

The Group will invest significantly in the comprehensive digital re-platforming of both the airline and Velocity Frequent Flyer program. It will accelerate the Group’s vision for the future, to not only improve Virgin Australia’s commercial capability and guest experience, but significantly enhance the employee experience and increase the pace of profitable revenue growth, enabling faster and bigger job growth opportunities.

5. Strong balance sheet and investment capital for both transformation and growth

The Group will emerge from Voluntary Administration with a strong balance sheet, worthy of an investment grade rating, providing resilience and future growth potential.

Backed by Bain Capital, one of the world’s leading private investment firms with more than $AUD150 billion assets under management, Virgin Australia will have a strong balance sheet to withstand material future shocks to the industry.

6. Jobs and future growth

The Group’s people have shown extraordinary resilience during this uncertain period and the focus now is to preserve as many jobs in the immediate term as possible while building a business that is healthy and sustainable for decades to come.

As a result of the changes announced today, including the transition to a single Boeing 737 fleet for domestic and short-haul flying, it is expected approximately 3,000 jobs will be impacted, primarily across the operations functions, and corporate roles which directly support the operation. Formal consultation with unions and employee groups has commenced today, and all options including voluntary redundancy, redeployment, leave without pay and flexible work arrangements will be explored to retain as many jobs as possible.

While devastating for our people, making these changes now will secure approximately 6,000 jobs once market demand recovers, with potential to increase to 8,000 jobs in the future. Team members who remain stood down as the Group waits for domestic and international travel restrictions to ease, or are on Leave Without Pay, will continue to receive the JobKeeper payment until it expires in March.

All team members that leave the business will depart with care and respect. Their entitlements will be paid in full and the Group is working with over 100 partners to identify short and long-term redeployment opportunities.

TRAVEL CREDITS AND SUPPORT FOR GUESTS

Bain Capital understands customers and staff are at the heart of the Virgin Australia business. As an acknowledgement of this, all travel credits and Velocity Frequent Flyer points will be carried forward under its ownership.

Virgin Australia will provide customers with the value of their travel credits post administration. To preserve value for customers with credits for bookings made prior to administration, booking dates will also be extended to 31 July 2022 for travel until 30 June 2023. Further information about the use of credits will be provided to customers in due course.

Customers and travel agents will be notified directly of any flight cancellations associated with the announcements made today. Tigerair Australia customers and those affected by any cancellations will be provided a travel credit for use on Virgin Australia operated services.

VOTE OF CREDITORS

Deloitte Restructuring Services partners and Administrators Vaughan Strawbridge, John Greig, Sal Algeri and Richard Hughes were appointed on 20 April 2020. They have entered into a binding sale agreement for the business with Bain Capital and continue to work with Bain and Virgin Australia management on the restructuring of the airline.

With full support of Deloitte and Bain Capital, this plan will form part of a Deed of Company Arrangement (DOCA), which will be put to a vote at the second creditors’ meeting.

Tigerair Australia aircraft photo gallery:

Tigerair Australia aircraft slide show:

https://airlinersgallery.smugmug.com/frame/slideshow?key=cLnW72&speed=3&transition=fade&autoStart=1&captions=0&navigation=0&playButton=0&randomize=0&transitionSpeed=2

Virgin Australia suspends all international flying, grounds 53 aircraft

Virgin Australia has made this announcement:

  • Suspension of all international flying from March 30 to June 14, 2020
  • Group domestic capacity reduction of 50 percent until June 14, 2020
  • Temporary grounding of the equivalent of 53 aircraft from the Group’s fleet
  • Dedicated customer care hub for impacted guests at virginaustralia.com

The Virgin Australia Group has today announced a temporary suspension of international services and further cuts to domestic capacity in response to expanded government travel restrictions and increased impacts from COVID-19 on travel demand.

As a leading airline group, Virgin Australia will work closely with Government to prioritise bringing Australians home and returning visitors back to their point of origin safely, while maintaining its important role in supporting connectivity and the nation’s economy.

CEO Commentary

Virgin Australia CEO and Managing Director Paul Scurrah said, “We have entered an unprecedented time in the global aviation industry, which has required us to take significant action to responsibly manage our business while balancing traveller demands and supporting the wellbeing of Australians.

“We have responded by making tough decisions which include reducing our domestic capacity and phasing in the temporary suspension of international flying for a period of two and a half months.

International changes

The Group will suspend all international flying for a period of two and a half months in response to the new travel restrictions announced by Government. This includes the grounding of five Boeing 777, one Airbus A330 and fourteen Boeing 737 aircraft from the Group’s international fleet.

The changes include:

  • Temporary suspension of all international services from 30 March to 14 June 2020 inclusive.
  • Melbourne to Los Angeles services suspended from 20 March.
  • Inaugural Brisbane to Haneda service, postponed from 29 March.
  • Inaugural Melbourne to Denpasar service, postponed from 29 March.

Virgin Australia will operate a reduced international schedule between now and March 29, 2020 to enable Australians to return home and visitors to return to their point of origin.

Domestic changes

In response to weakened demand, the Group will reduce domestic capacity by around 50 percent until June 14, 2020. This includes the grounding of twenty Boeing 737, six A320, two ATR and five Airbus A330 aircraft from the Group’s domestic fleet.

The route and schedule detail of these changes across Virgin Australia and Tigerair Australia is currently being worked through and will be published over the next week.

Impact on our people

The temporary grounding of the international fleet and reduction in domestic capacity will impact the company’s workforce and the Group is working constructively with our team members and their unions.

The Group is undertaking a range of measures to address the current situation including the use of accrued annual leave, leave without pay, redeployment and, in some circumstances, redundancies.

These are in addition to measures we’ve already announced, including the temporary reduction in Chairman and Board of Director fees by 15 per cent, removal of management bonuses, no base salary increases for non-EA team members and additional leave measures.

Support for guests

Virgin Australia is offering flexible booking options for impacted guests and those who wish to change their travel due to COVID-19. Virgin Australia has also set up a dedicated customer care hub on our website to deal with the surge of customer queries and travel changes.

  • Guests with new or existing domestic and international bookings through to 30 June 2020 have the option to change their flight to a later date, and/or a different destination, without incurring a change fee. Guests who no longer wish to travel can cancel their flight and retain the value of the booking as a travel credit.
  • Guests affected by the suspension will be contacted regarding their booking. Guests who have booked an international flight between 30 March and 14 June will be contacted by Virgin Australia within the next 14 days via email.
  • Travel agents will make direct contact with guests who have booked through them.

Guests are advised that due to the large number of schedule changes they should not contact the airline unless they are travelling in the next 24 hours or need immediate assistance to return home or to their point of origin.

Virgin Australia aircraft photo gallery:

Virgin Australia unveils plans for a comprehensive redevelopment of its domestic terminal at Melbourne Airport

 

Virgin Australia on December 4, 2017 unveiled plans for a comprehensive redevelopment of its domestic terminal at Melbourne Airport’s Terminal 3 (‘T3’) over the next three years.

As seen in concept designs released today, Virgin Australia guests travelling through Melbourne will enjoy a significantly enhanced and streamlined experience from arrival at the airport to taking off from the tarmac.

By mid-2019, the redeveloped domestic terminal will offer an automated check-in process in the T3 check-in hall for Virgin Australia guests, including:

  • Automated bag drop facilities;
  • Enhanced self-service kiosks, which will enable guests to check-in, print boarding passes, add bags and print baggage tags;
  • Service pods where Virgin Australia ground crew can assist guests with check-in; and
  • A service desk to assist with traditional check-in and general enquires.

The introduction of these automated check-in features will significantly reduce the time taken to check-in and check luggage.

 

Once construction has been completed, T3 will also feature:

  • A dedicated Premium Entry for Virgin Australia’s Business Class guests and Platinum and Gold Velocity Frequent Flyers, including dedicated check-in, bag drop and security screening features and direct access to the Virgin Australia Lounge;
  • Construction of a new internal ramp between Terminals 3 and 4 that will enable the repositioning of the general T3 security screening facilities. This will reduce passenger congestion in T3, create a more spacious area for T3 security screening and offer better access to the new retail offering in Terminal 4;
  • Virgin Australia Lounge guests will enjoy a seamless transition to their gates, with all of T3’s repositioned security screening facilities to be located before the Lounge entry; and
  • The addition of two baggage carousels in the T3 arrivals hall.

The unveiling of these concept designs follows the domestic terminal agreement that was signed in Junebetween Virgin Australia and Melbourne Airport, which included key commercial terms to support the redevelopment of T3.

Virgin Australia and Melbourne Airport are working together to finalise the design process, with the works anticipated to begin in 2018.

The Group Executive for Virgin Australia Airlines, Rob Sharp, said the proposed upgrades were a part of Virgin Australia’s commitment to creating the world’s most rewarding travel experience.

“The airport experience is an important part of our guest’s overall travel experience. Virgin Australia runs a major operation at Melbourne Airport, operating up to 100 return flights each day. The redeveloped terminal will see Virgin Australia provide guests with a world class experience on the ground, to match the unrivalled service we provide on-board” said Mr Sharp.

“We were the first airline in Australia to introduce the kerbside Premium Entry product at Sydney Airport and we are thrilled to be able to offer this to our customers travelling through Melbourne,” he said.

 

Melbourne Airport CEO, Lyell Strambi, has also welcomed the proposed redevelopment plans, saying it is a boost for the city of Melbourne.

“Around two thirds of all passengers travelling through Melbourne Airport are flying on a domestic service, so we welcome Virgin Australia’s vision for the traveller experience and commitment to Melbourne. We are excited to continue working closely with Virgin Australia to bring this wonderful vision to life,” he said.

The refurbished T3 Terminal will also be instrumental in supporting the city on the whole, with current projections predicting that Melbourne will overtake Sydney as Australia’s largest city as early as 2029.

In other news, Virgin Australia issued this statement concerning volcanic activity at Mount Agung in Bali:

We continue to closely monitor the volcanic activity at Mt Agung in Denpasar. As flying conditions have improved, our team of safety experts have declared it safe to continue operations. Therefore, Virgin Australia plans to operate today’s scheduled services from Denpasar.

For full details, please visit our Travel Alerts page: virg.in/travelalerts

Subject to conditions remaining favorable, Virgin Australia plans to resume normal operations between Australia and Denpasar from tomorrow, Tuesday December 5, 2017.

Today’s flights (Monday, December 4) from Australia to Denpasar remain cancelled, however guests booked to travel to Denpasar from Australia on Tuesday December 5, 2017 should proceed to the airport tomorrow, unless otherwise advised. As this situation remains unpredictable flights may be cancelled at short notice if conditions deteriorate.

Video:

Images: Virgin Australia and Wood Bagot.

Virgin Australia to operate a new route from Sydney to Tamworth

Virgin Australia Airlines (Brisbane) has announced it will introduce flights between Tamworth, New South Wales and Sydney from May 2015.

The airline will introduce this new service on May 25, 2015, using its ATR 72 turboprop 68-seat aircraft to operate six return services between Tamworth and Sydney each week.

Virgin Australia will operate a return flight every day (excluding Saturday) departing Sydney at 1.55 pm (1355) arriving into Tamworth at 3.00 pm (1500). The flight will depart Tamworth at 3.30 pm (1530) arriving into Sydney at 4.35 pm (1635).

Copyright Photo: Peter Gates/AirlinersGallery.com. Skywest Airlines ATR 72-212A (ATR 72-500) VH-FVI (msn 955) prepares to depart from Brisbane.

Virgin Australia aircraft slide show: AG Airline Slide Show

Virgin Australia domestic route map:

Virgin Australia logo-2

Virgin Australia 3.2015 Domestic Route Map

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Virgin Australia introduces its new Boeing 737 Business Class to New Zealand, announces a half year financial turnaround

Virgin Australia Airlines’ (Brisbane) announced its Business Class began flying across the Tasman Sea on February 28, as part of a progressive rollout in the New Zealand and Pacific Island markets.

The inaugural return flight operated from Auckland to Sydney and signifies an enhancement to the airline’s premium service offering on trans-Tasman and Pacific Island routes. All other services come into effect on March 31, 2015.

Virgin Australia 737-800 Business Class 1 (VA)(LRW)

A progressive refit on 10 of the airline’s Boeing 737 fleet is currently underway, reconfiguring the aircraft with the 2-2 business class configuration, which feature luxury leather seating and menus designed by resident head chef Luke Mangan, as well as the introduction of priority services including check-in and boarding.

Virgin Australia 737-800 Business Class 2 (VA)(LRW)

Virgin Australia Business Class features include:

Luxury leather seating with 38” seat pitch on the Boeing 737 (above)
Comfort packs with luxurious blankets, pillows, and International-style amenity kits including Australian organic cosmetics by GROWN for flights over three hours
Newspapers until noon daily
Exclusive Luke Mangan gourmet full service dining experience
Premium Australian wines, beers, and spirit selection
Gourmet tea selection from Madame Flavour
Priority baggage service where available

On the financial side, the company issued its half year results ending on December 31, 2014. CEO John Borghetti announced a significant improvement with an underlying profit before tax of A$10.2 million, an improvement on a loss of A$45.4 million in the first half of 2014.

Read the full report: CLICK HERE

Copyright Photo: Colin Hunter/AirlinersGallery.com. Virgin Australia Airlines Boeing 737-8FE ZK-PBB (msn 33797) taxies at Auckland, New Zealand.

Virgin Australia aircraft slide show: AG Airline Slide Show

AG Aviation friend

Video from Virgin Australia: The repainting of the last Virgin Blue aircraft

Who remembers our red aircraft? We’ve just completed the repainting of our fleet in our current white and red livery. Watch the 11 day process of repainting a Virgin Australia aircraft here, in two minutes!

Virgin Australia proposes to buy the remaining 40% shares of Tigerair Australia for one dollar

Virgin Australia Holdings Limited (Virgin Australia) (Brisbane) issued this proposal today.

Virgin Australia Holdings Limited (Virgin Australia) today (October 17) announced a transaction which would see Virgin Australia acquire the remaining 40 percent of shares in Tiger Australia Airways Pty Ltd (Tigerair Australia) from Tiger Airways Holdings Limited (Tiger Holdings) for a price of A$1.

The transaction, once completed, will see Virgin Australia secure 100 per cent ownership and full control of Tigerair Australia and brings to a conclusion the joint venture between Virgin Australia and Tiger Holdings which commenced on July 8, 2013.

As part of the proposed acquisition, Virgin Australia will secure the brand rights to fly Tigerair Australia to a number of short-haul international destinations, providing new growth opportunities for the business.

Virgin Australia Chief Executive Officer, John Borghetti said: “This proposed transaction marks an important milestone for Tigerair Australia and forms part of the Virgin Australia Group’s Virgin Vision strategy to 2017.

“Given the ongoing subdued consumer demand in the Australian domestic market, the growth of the Tigerair Australia domestic fleet is likely to be reduced. Under this proposed transaction, we will benefit from the economies of scale and achieve profitability ahead of schedule by the end of 2016, by leveraging the resources of the wider Virgin Australia Group.

“Tiger Holdings and Virgin Australia have worked well together over the past 14 months on building a strong operating platform for Tigerair Australia. The joint venture has strengthened systems and processes, increased aircraft utilisation, established a Brisbane base and leveraged synergies across a range of areas.

“We remain committed to maintaining the airline’s low cost business model and the separate Tigerair brand, ensuring that we can continue to deliver the most competitive pricing in Australian budget travel”, Mr Borghetti said.

The partnership between Virgin Australia and Tiger Holdings will continue into the future through brand licencing and certain services which will continue to be provided by Tiger Holdings direct to Tiger Australia.

The transaction is also subject to conditions precedent, including Foreign Investment Review Board approval, Tiger Holdings shareholder approval and entering into long-form licensing agreements, services agreements and other ancillary transaction documents. It is expected that Virgin Australia will consolidate Tigerair Australia’s financial results going forward as result of the transaction.

Virgin Australia anticipates that completion will occur by the end of 2014 and will keep the market updated on the timing of completion of the transaction.

Copyright Photo: Jacques Guillem Collection/AirlinersGallery.com. Virgin Australia will retain the Tigerair brand but the Airbus A320 fleet clashes with Virgin Australia’s Boeing 737s and the pictured Embraer 190s.

Virgin Australia Aircraft Slide Show: AG Slide Show

Tigerair Australia Aircraft Slide Show: AG Slide Show

 

Virgin Australia and Delta Air Lines to expand the codeshare agreement to three new destinations

Virgin Australia Airlines (Brisbane) and Delta Air Lines (Atlanta) have announced they will be expanding their partnership in North America, adding three new destinations as part of their codeshare agreement.

Customers of both airlines will now be able to fly from Australia to Nashville, Kansas City and Raleigh/Durham as part of the alliance’s continued commitment to strengthening its footprint in the US market.

The growing alliance between the two airlines, which was launched in 2011, now offers Australians access to over 245 destinations across North and Central America.

Flights between Los Angeles and Nashville will operate daily, Los Angeles to Kansas City services will operate twice a day and 10 flights per week will be available on the Los Angeles to Raleigh/Durham route.

Virgin Australia and Delta Air Lines fly from Sydney, Melbourne and Brisbane into Los Angeles allowing customers to connect onto Delta Air Lines’ extensive North and Central American network.

In other news, Virgin Australia also announced that for the first time it is offering a codeshare flight with South Africa’s largest carrier, South African Airways.

Virgin Australia will commence codeshare on South African Airways’ daily nonstop services from Perth to Johannesburg. This follows the launch of South African Airways’ codeshare on Virgin Australia’s daily services from Perth to Adelaide, Brisbane, Melbourne and Sydney earlier this year.

South African Airways operates daily nonstop services between Johannesburg and Perth with Airbus A340-300s and Airbus A340-600s.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Boeing 777-3ZG ER VH-VOZ (msn 35302) arrives in  Los Angeles.

Virgin Australia: AG Slide Show

Delta Air Lines (current): AG Slide Show

Virgin Australia unveils its new Business Class and Premium Economy cabins

Virgin Australia Airlines (Brisbane) today (September 24) announced the next evolution in the airline’s premium experience, unveiling a major redesign of the Business Class and Premium Economy cabins on board its wide-body fleet of aircraft.

The redesign involves the introduction of suite-style seating in Business Class and an extensive upgrade of the Business Class and Premium Economy cabins, including more spacious seating configurations and new bars on the airline’s Boeing 777 aircraft.

Virgin Australia 777-300 Business Class

Copyright Photo: Virgin Australia. The new Business Class seat.

The revolutionary Business Class suites, which convert into 80 inch lie-flat beds, represent a major enhancement to the travel experience on board Virgin Australia’s Airbus A330 and Boeing 777 aircraft and the first major product innovation to be announced under the airline’s new three-year strategy, Virgin Vision 2017.

The innovative 1-2-1 configuration will guarantee passengers a window or aisle seat and maximum privacy to work, rest and unwind. The suite includes a unique tablet holder, a 16 to 18 inch touch screen for entertainment, multiple lighting settings and plenty of storage. The seat also offers the ultimate comfort with new soft furnishings, a number of adjustable positions to suit the differing needs of customers and an adjustable arm rest to increase the seat width when sleeping.

Inspired by the interiors of some of the world’s most premium automotive designs, Virgin Australia enlisted the support of renowned design agency, Tangerine London, who led the industrial design of the new seats and cabins to create the premium and tailored new-look Business Class experience. B/E Aerospace was chosen as the manufacturer and has named the new Virgin Australia Business Class suite the ‘Super Diamond’.

Virgin Australia Chief Executive Officer John Borghetti said: “Today marks a new era for our premium customer experience both domestically and internationally. We believe the sophisticated new suites will set a new standard in Business Class travel, not just in Australia but around the world.

“Our Virgin Vision to 2017 is to become Australia’s favorite airline group and today’s announcement is central to our strategy as it will see Virgin Australia deliver the best premium travel experience in Australia.

“We are committed to maintaining a competitive advantage in customer experience in order to ensure that Virgin Australia is the number one choice for premium travellers”, Mr Borghetti said.

The suites will roll out to Virgin Australia’s Airbus A330 fleet in early 2015 with the first aircraft expected to be in service by March and the complete refit of the fleet to be finalised by August.

The roll out of the new Business Class product to the Boeing 777 fleet will commence from November 2015 and be complete by early 2016. The upgrade will also include the introduction of a redesigned Business Class bar and changes to the Premium Economy cabin.

Virgin Australia Premium Economy

Copyright Photo: Virgin Australia. The new International Premium Economy seat.

 

A reduction in the number of seats will make Virgin Australia’s International Premium Economy a more exclusive experience, and give passengers three inches more legroom.

Top Copyright Photo: Michael B. Ing/AirlinersGallery.com. Boeing 777-3ZG ER VH-VPD (msn 37938) approaches the runway at Los Angeles International Airport.

Virgin Australia: AG Slide Show

Virgin Australia CEO: “The 2014 Financial Year has seen one of the most difficult operating environments in the history of Australian aviation”, loses $332.2 million in its fiscal year

Virgin Australia Holdings Limited (Virgin Australia Airlines) (Brisbane) reported a Statutory Loss after Tax of A$355.6 million ($332.2 million) including the impact of equity accounted investments. Financial performance for the 2014 Financial Year was impacted by the confluence of excess market capacity, weak consumer sentiment, continued economic uncertainty and the $51.6 million cost of the carbon tax.

Virgin Australia Chief Executive Officer John Borghetti said: “The 2014 Financial Year has seen one of the most difficult operating environments in the history of Australian aviation.

“While the Virgin Australia Group performed well in attracting high yielding passengers and containing cost growth over the full year, underlying revenue performance was impacted by the challenging operating conditions.

“Notwithstanding these conditions, it was important for the Virgin Australia Group to complete the Game Change Program strategy and strengthen our balance sheet in order to deliver sustainable returns for shareholders over the long-term.

“Over the 2014 Financial Year, the Group further increased revenue from the Corporate and Government market segment, which now represents over 25 per cent of our domestic revenue, far exceeding our original goal of 20 per cent.

“Furthermore, our success in integrating the Skywest8 business has enabled us to significantly grow revenue from the Charter segment, increasing comparative revenue by around 30 per cent on the 2013 Financial Year. We have also positioned our loyalty program Velocity Frequent Flyer as a significant value driver for the Group, with the highest annual membership acquisition in the program’s history and a significant increase in member engagement.

“The Group’s cost program delivered a significant reduction in cost growth over the second half of the 2014 Financial Year, with growth in Cost per Available Seat Kilometre (Underlying CASK)9 including fuel and foreign exchange halving to approximately 2 per cent – a strong performance given we had lower capacity growth and we continue to invest in product and service initiatives for our customers.

“As a result of several major balance sheet initiatives executed during the year, the Virgin Australia Group finished the year with a total cash position of $783.8 million and an unrestricted cash position of $541.0 million.

“Virgin Australia also re-entered the Australian domestic budget market through the acquisition of a 60 per cent interest in Tigerair Australia at the beginning of the 2014 Financial Year. Over the last 12 months Virgin Australia has worked with Tiger Airways Holdings Limited and Tigerair Australia to overhaul revenue and accounting systems, develop the management team, improve asset utilisation and enhance the operational platform. Tigerair Australia’s performance needs to be viewed in the context of overall industry performance and weak consumer sentiment, particularly in the last quarter of the year, which has a more pronounced impact on low cost carriers. As a result of progress made during the 2014 Financial Year, and in particular marked increases in customer satisfaction, Tigerair Australia is now well positioned to benefit from a recovery in the domestic market when conditions improve.

“While the 2014 Financial Year has been an extremely tough year for the industry, I am confident that the Virgin Australia Group is in a strong strategic position going forward.

“This next period for us is about maximising the Group’s potential, by extracting value from the business and generating sustainable profitability”, Mr Borghetti said.

Financial and Operating Performance

“Total Group Revenue increased 7.1 per cent to $4,306.6 million on the 2013 Financial Year, including the additional revenue associated with the acquisition of Skywest. While revenue growth in the leisure and regional segments was subdued, this was partially offset by revenue growth in the Corporate and Government, Charter and Interline and Codeshare segments.

“Group Yield increased by 1.2 per cent, driven by a change in customer mix and improved access to global distribution channels following the introduction of the SabreSonic system in January 2013.

“The recently acquired Skywest business has now been fully integrated into the Virgin Australia platform and we are seeing positive performance from the Charter business which has increased its comparative revenue contribution by 30 per cent this financial year.

“International revenue increased 2.6 per cent compared to the 2013 Financial Year against the backdrop of strong competition and a particular weakness in the South East Asian market.

“As we outlined in February, Virgin Australia increased its focus on driving down costs during the second half of the 2014 Financial Year. Over the half, we implemented a number of major cost reduction initiatives including programs to reduce overall employment and procurement costs, as well as introducing a new Fuel Management System, targeting 2 per cent fuel efficiency savings by the end of Financial Year 2015.

“While there was a material increase in overall costs this year due to the full year impact of the Skywest acquisition in April 2013, Underlying CASK growth was well contained over the year, with a particularly strong performance in the second half.

“Virgin Australia incurred $117.3 million of restructuring costs11 during the 2014 Financial Year as a result of the balance sheet initiatives undertaken, the completion of strategic investments and the optimisation of the business platform. The business has also taken a restructuring provision for the exit of the two original Airbus A330 aircraft, as part of our program to reduce our future cost base through further fleet optimisation, and has booked an asset impairment charge of $56.9 million, driven predominantly by excess capacity and competitive pressure in the South East Asian market.

“We continued to exceed business efficiency project targets, delivering cumulative efficiency gains of more than $191 million and remain on track to deliver cumulative productivity gains of more than $400 million over the three years to 30 June 2015.

“With Virgin Australia’s major shareholders equity accounting their investments in Virgin Australia from 1 July 2014, it was appropriate for Virgin Australia to align its accounting policies with those of its shareholders and other industry participants. Consequently, a revised maintenance policy in relation to leased aircraft has been adopted which required a restatement of prior financial year results in the Appendix 4E. As a result of the adoption of this maintenance policy, there is an increase in the opening retained earnings and the equity of the business of $67.2 million.

“Virgin Australia operates a very successful Australian dollar designated hedging program, providing a large degree of short term certainty and longer term participation and protection. The program achieved effective fuel and foreign exchange rates during the 2014 Financial Year, delivering a result that was significantly favourable compared to spot prices.

“In order to reduce the volatility of reported financial performance attributed to the hedging program, Virgin Australia will adopt AASB 9 – Financial Instruments early, from 1 July 2014. As a result of the early adoption of this accounting standard, future statutory financial results going forward are expected to reflect reduced accounting ineffectiveness and deferral of time value of options until maturity for qualifying hedges. In the 2014 Financial Year, time value of options has been separately identified from the underlying results in anticipation of adopting this standard. The 2013 comparatives have been restated in the Financial Year 2014 ASX presentation to reflect this treatment.

“Virgin Australia acquired a 60 per cent interest in Tigerair Australia on July 8, 2013, with our share of equity-accounted losses for the 2014 Financial Year amounting to $46.1 million. Despite the challenging operating conditions, Tigerair Australia carried 500,000 more passengers than the previous year, with passenger numbers increasing to 3.3 million for the 2014 Financial Year.

“In terms of capacity growth, Virgin Australia recorded normalised growth of 0.112 per cent across the domestic network (excluding Tigerair Australia) for the 2014 Financial Year.

“Importantly, during the 2014 Financial Year, domestic Revenue Load Factors expanded 1.8 percentage points to 76.9 per cent, supported by a record 17.3 million customers choosing to fly with us.

“Virgin Australia is focused on delivering on time services for all of our customers and we have achieved an On Time Performance (OTP) of 84.0 per cent for the 2014 Financial Year, an increase of 2.9 percentage points compared to the prior corresponding period”, Mr Borghetti said.

Cash Position

“Virgin Australia paid down approximately $200 million in Gross Debt during the second half of the 2014 Financial Year and finished the year with a total cash balance of $783.8 million and an unrestricted cash balance of $541.0 million, up $203.3 million and $214.5 million respectively on 30 June 2013.

“We have significantly enhanced our balance sheet and liquidity through initiatives such as the issue of Enhanced Equipment Notes in October 2013, the Entitlement Offer in November 2013 and the sale and lease back of our Brisbane based office in May 2014. The proposed transaction with Velocity Frequent Flyer announced today will see a further boost to the liquidity position of the Group.

“Virgin Australia remains focused on maintaining a strong unrestricted cash balance and continues to review ways to utilise resources more efficiently”, Mr Borghetti said.

Game Change Program Strategy Update

“When we introduced the Game Change Program, it was a long-term strategy to reshape the airline and establish the Virgin Australia Group as a long-term player in all key segments of the Australian aviation market.

“Over the 2014 Financial Year, the Group focused on fast-tracking the completion of the Game Change Program and finished the strategy ahead of schedule.

“I am pleased to report that we have now increased our percentage of domestic revenue from the Corporate and Government market segment to more than 25 per cent, far exceeding our original strategic goal of 20 per cent. This is an enormous credit to all of our team members, who have worked tirelessly to ensure we could attract this important market segment.

“As a result of the important alliances we have forged and the implementation of SabreSonic, we have developed a comprehensive global virtual network and accessed growth markets around the world. In just a few years, the business has grown from offering around 150 destinations to more than 460 destinations and increased interline and codeshare traffic by more than 300 per cent.

“At the same time we have completed the important process of integrating and aligning the airline operations and brands, delivering and investing in one strong Virgin Australia brand that is recognised around the world.
“Under the Game Change Program, Velocity Frequent Flyer has gone from strength to strength, expanding its global network to over 460 destinations and offering competitive earn and redemption rates and unique member rewards. Over the last four years, the program has doubled membership numbers to 4.5 million and has built the widest retail offering of any program in Australia. Velocity has achieved a range of industry accolades, including recognition in five categories at the 2014 Freddie Awards, the highest achievement of any airline program at these global awards.

“Completing the transformation of the in-flight and on-the-ground experience under the Game Change Program has been a key focus for the business during the 2014 Financial Year, with significant enhancements to our lounge network, in-flight entertainment and catering”, Mr Borghetti said.

“It is thanks to the tireless efforts of every one of our team members that we have successfully implemented this strategy ahead of schedule in a challenging environment. We have transformed the business and our research indicates that we have now established Virgin Australia as the airline of choice14. Therefore we can confidently say that “The Game” has changed.

“I would like to thank all of our team members for their passion and dedication in delivering the strategy”, Mr Borghetti said.

Virgin Vision 2017

“Now that we have completed the Game Change Program, this next period for us is about maximising the Group’s potential, by extracting value from the business and generating sustainable profitability. To do this, we need to increase the growing customer loyalty to the Virgin Australia Group. That is what will assure our business of a stable future revenue stream and enable us to deliver sustainable profitability as the market recovers.

“A few years ago, many travellers were wedded to our competitor because they had no other viable alternative. The Game Change Program essentially created an indifference15 and helped to dislodge those travellers loyal to the incumbent airline group, so that they were happy to travel with either of us, whilst building a Virgin Australia loyalty base.

“Going forward, we no longer want to create an indifference for this group, we want to convert more of them to our loyalty base. Therefore, our Virgin Vision to 2017 is to become Australia’s favourite airline group.

“Over the next three years, the Virgin Australia Group will focus on six key areas: capitalising on growth business opportunities, driving yield enhancement, implementing a new cost program, optimising the balance sheet, setting a new standard in customer experience and developing our people to their full potential”, Mr Borghetti said.

Capitalizing on growth business opportunities

Velocity Frequent Flyer

“Velocity Frequent Flyer will be one of our key growth businesses, as we aim to build one of the world’s leading loyalty programs. Today’s announcement regarding a strategic transaction for Velocity Frequent Flyer is just the beginning. This transaction represents an opportunity to accelerate growth and value for Velocity and the Virgin Australia Group. Over the next three years we plan to grow membership to more than 7 million, further diversify Velocity’s partner mix, increase partner numbers and strengthen member engagement in both points earned and points redeemed.

Charter

“Charter also represents a significant opportunity for the Group to grow and diversify revenue. Our Charter business has had a very successful first year, delivering comparative revenue growth of around 30 per cent for the 2014 Financial Year, from a combination of new contracts, growth from existing clients and the launch of our first charter operations on the East Coast. This business continues to represent strong growth opportunities for the Group, and we expect it to deliver more than $200 million in revenue by 30 June 2017.

Freight

“In the 2015 Financial Year, we will launch a Freight division, which will leverage off our current Regular Passenger Transport and Charter capability. We expect the freight business to grow on a similar trajectory to our new charter business with revenue expected to treble to between $150 and $200 million over the next three years to 30 June 2017.

Tigerair Australia

“Our investment in Tigerair Austraia presents an important opportunity for the Group to participate in the growth of the budget market segment.

“The Tigerair business has undergone the first year of its transformation program, which sets out a clear path to profitability. The focus over the next three years will be on successfully executing this program, to achieve profitability in Financial Year 2017.

“This includes:

Further improving customer satisfaction – Customer experience is a major driver of revenue growth and will be a strong focus for Tigerair Australia, with significant progress already made during the 2014 Financial Year.
Driving incremental revenue growth – Tigerair Australia has implemented a number of revenue enhancing initiatives this year, including a new revenue management system. Further initiatives to help drive incremental revenue growth will be rolled out.

Delivering cost synergies – Tigerair Australia will implement a range of network, operational and financial synergies, building on the cost savings from synergies already delivered, including the launch of the Brisbane base, coordinated pricing and joint procurement of fuel purchases with Virgin Australia.

Develop an efficient operating platform and network footprint – Operational efficiency will be a continued focus. Tigerair has made a number of enhancements this year which will drive benefits, including launching a Brisbane base, securing a new more efficient maintenance provider in BAE systems and reaching agreement with Sydney Airport Corporation Limited about infrastructure constraints at Sydney Airport.

“We are committed to working with Tiger Airways Holdings Limited and Tigerair Australia to ensure the airline has the right network footprint, service standards and cost leadership, to deliver improved financial performance.

Drive yield enhancement

“In addition to capitalising on growth businesses, we will be focusing on other opportunities to drive yield enhancement. This includes increasing our target of Corporate and Government domestic revenue mix to around 30 per cent by 30 June 2017; increasing interline and codeshare revenue through strengthening and expansion of alliance partnerships and optimising our new PROS revenue management system to drive incremental revenue opportunities.

$1 billion cost program

“Importantly, cost will be a major focus over the next three years, building on the work of the Business Efficiency Project. Over the five years to 30 June 2017, the program will generate $1 billion in cumulative productivity gains and will centre on the following:

Enhancing procurement – individually and with alliance partners.

Improving productivity – including increased fuel efficiency, increased utilisation of the Boeing 737 fleet and the retirement of two 12 year old Airbus A330 aircraft; as well as bringing forward our Boeing 737 Max aircraft deliveries from 2019 to 2018.

Streamlining our operations – including the integration of Virgin Australia’s New Zealand operations into the rest of our international business and the consolidation of our long-haul international bases from three into two.
Optimise the balance sheet

“Going forward, optimizing the balance sheet will be central to maintaining a strong platform. The proposed transaction with Affinity Equity Partners and Velocity Frequent Flyer will improve the liquidity and gearing position of the Virgin Australia Group even further, providing additional flexibility and resilience as we execute on “Virgin Vision 2017”.

“As a result of this transaction, lease-adjusted balance sheet gearing will reduce by 8 per cent. The Group profit and loss impact from this transaction is expected to be neutral in the 2015 Financial Year. Over the next three years, we will continue to execute initiatives designed to improve liquidity, reduce debt and maintain a strong cash balance.

Set a new standard in customer experience

“The Virgin Australia Group will also maintain its strong focus on product and service and over the next three years, we will set a new standard in customer experience.

“While we cannot disclose all the initiatives for competitive reasons, they include: the introduction of Business Class on our Trans-Tasman and Fiji services from February 2015; the launch of our first Premium Exit at our Melbourne Airport lounge next month; the unveiling of a new state-of-the-art airport ground experience with the opening of our new terminal and lounge in Perth next year; and the upgrade of our Brisbane terminal and launch of our Darwin lounge in March next year.

“Furthermore, in the next few weeks, we will make a major announcement on our premium product offering.

Develop our people to their full potential

“Our people, and their willingness to go above and beyond for our customers and our shareholders, remains the Virgin Australia Group’s core differentiator in the market.

“We are committed to remaining the most attractive employer in the industry and, for that matter, one of the most desirable employers in Australia. It is our ability to attract, develop and retain the best talent, not just in the industry, but across Australia and beyond, that will see us succeed. Over the next three years, we will be rolling out a range of initiatives to continue to develop our people to their full potential.

“I would like to take this opportunity to thank all of our team members for their passion and dedication to delivering the Game Change Program strategy. We are privileged to have such a talented, devoted team and we are committed to supporting their development”, Mr Borghetti said.

Conclusion and Outlook

“The 2014 Financial Year was an extremely challenging year for the Virgin Australia Group and the Australian aviation industry as a whole.

“Given the uncertain economic environment we are unable to provide guidance for the 2015 Financial Year at this time and we will not be providing guidance on capacity growth going forward.

“However, the Virgin Vision to 2017 sets out a comprehensive plan of initiatives that will see us deliver a sustainable, profitable business over the long-term.

“While the current environment remains challenging, the Virgin Australia Group has significantly enhanced its strategic position over the last four years and is well placed to capitalise on market recovery”, Mr Borghetti said.

Copyright Photo: John Adlard/AirlinersGallery.com. Airbus A330-243 VH-XFE (msn 1319) taxies at Sydney.

Virgin Australia: AG Slide Show