Tomorrow’s late morning (23 February) half yearly financial results announcement and briefing by Virgin Blue should fill in some of the gaps in the public knowledge of how well, or poorly, the main Australian carriers are performing.
Virgin Blue’s CEO Brett Godfrey is the person primarily responsible for an airline that has held more than 30% of the domestic air transport market since 2003. That market share statistic is interesting, because although it moves around a bit, the arrival of Jetstar in June 2004 did not essentially change the Qantas group share, rather than defend it, and at the expense of the parent Qantas’s share. Virgin Blue’s most rapid period of expansion, in 2002 and 2003, was over by the time Jetstar arrived.
Qantas can counter this by pointing to periods of much improved profitability as Jetstar expanded, although the last six months wasn’t one of them, with the group loosing traction whether measured by its major parts or by the whole of its operations.
What Godfrey says about where Virgin Blue has been and where it is going isn’t going to be euphoric. It is making the most badly timed foray into long haul international flying in Australian airline history this Friday when V Australia takes off for Los Angeles in what most observers rate as one of the most ‘gorgeously appointed’ Boeing 777-300ERs yet put into service.
Even the toilets on the V Australia jet play music when they are flushed, but the question for Virgin Blue shareholders is what else gets flushed at the same time. Virgin Blue looks on previous results to be doing reasonably well domestically, but even if there wasn’t a global financial crisis, the launching of a subsidiary into a wide open international market with an entirely new type of jet and product was always going to cost the whole operation big dollars in the first years.
Like those of Qantas, Virgin Blue domestic flights are generally full, too often late, and generally sold at competitive prices that are nevertheless well north of the super cheapies that they, and Jetstar and Tiger, offer at times that are next to useless in at least one direction for anyone flying for business purposes.
Now that fuel is a fraction of what it peaked at in the previous six months, shouldn’t Virgin Blue and Qantas flights be looking at quite good returns considering both have reduced their capacity to offset falling demand?
Godfrey leads an airline that many of its shareholders received as a give away by Toll Holdings when it discovered it’s stake was unsaleable, and is now, like every other carrier, captured in a situation where the outlook for air travel looks very discouraging in the medium term.
What Godfrey says tomorrow will be of absorbing interest.
