management

Jun 30, 2017

Turbulence at top, or business as usual, for Virgin Australia?

Does a dive down the exit chute by Virgin's group executive John Thomas means things will be better or worse for its 'guests'?

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

John Thomas, far right. demonstrating extra space economy class

Without prejudice, the removal of John Thomas from the position of group executive Virgin Australia airlines signals further uncertainty as to what the carrier will do about the suitability of its products in a market that isn’t sustaining the expectations it and major competitor Qantas hold for domestic air travel.

It’s a difficult challenge for the deeply scarred small retail investors in Virgin Australia Holdings, as well as those fickle consumers who value the presence of its full service and low cost (Tiger) brands in the game, even they only fly Qantas or Jetstar at lower fares than they would if the VAH camp imploded.

Mr Thomas is being replaced by Rob Sharp, the CEO of the VAH owned low fare but ancillary charges focused Tigerair franchise, which is being rebranded Scoot elsewhere in Asia, from late July by Singapore Airlines which owns one fifth of the stock of the Virgin branded holding company.

To add to a sense of unease about the Thomas departure is his prior determination to add more ancillary revenue offerings to Virgin Australia, including the extra space economy seats now on sale, which blur the distinction between the full service Virgin brand and the Tiger brand where Sharp has built up these extra charges as an important plank in its revival as a force in routes where Qantas and Jetstar are on guidance, doing much better than their Virgin alternatives.  Well, doing better for shareholders.

Mr Thomas may well have been wrong about his initiatives for Virgin as suggested in two stories in the Fairfax press this morning. But will Mr Sharp also pursue more ancillary charges for Virgin, making it less full service, which is seemingly risky when Qantas has embraced, with a few introductory hiccups, free and hopefully eventually stable internet access on domestic jets.

It could be time to stock up on popcorn rather than leap to judgement.

The best outcome will be the one that gives us continuous opportunities to reward or punish the two dominant domestic brands seeking our bookings.

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