18 months after emerging from bankruptcy with new owners, Virgin Australia’s CEO says the airline has refocused on what it does best.
Virgin Australia's CEO Jayne Hrdlicka says the airline lost sight of its roots in the decade before it entered bankruptcy in 2020. Hrdlicka says the revamped airline, now owned by a US private equity firm, is a better business because they've refocused on that core – getting Australians from A to B within Australia and teaming up with quality partner airlines to fly them offshore.
Speaking at an IATA 2022 in Doha on Monday, CEO Jayne Hrdlicka provided some insight into what hauling the airline out of bankruptcy involved and why Virgin Australia is forming new partnerships, even if at the expense of longstanding and now former partners. Formerly Jetstar's CEO, Hrdlicka took the top job at Virgin Australia in late 2020 after helping guide it out of bankruptcy.
"We've taken our costs back, we've got the focus back on who we want to serve from a market standpoint, we're now a great value carrier. We just lost sight of the forest for the trees for a little while – and now we're back," she said.
Virgin Australia's CEO also admitted to negotiating the sale of the airline to Boston-based Bain Partners in 2020 entirely via Zoom. She jokes becoming adroit at Zoom meetings was her lockdown hobby. But for nearly two years, real-life meetings with Virgin Australia's new owners were impossible owing to border closures. It took until April 2022 for the Virgin Australia CEO to meet the last of the airline's board members face-to-face.
Virgin Australia is now performing well. Its fleet of Boeing 737-800s are worked hard and flying solid loads. More planes, including Boeing's MAXs, are due soon. The airline has refocused on flying within Australia with some supplementary short-haul international services. Hrdlicka calls it a simple model that works well. She says Virgin Australia enjoys a 33% market share within Australia and has no trouble competing effectively against the Qantas Group.
"We're clear about the fact that we're focused on leisure, premium leisure, small and medium-sized businesses, and value-conscious corporates. We've now got an experience that runs up against that proposition. We've completely restructured pricing in the marketplace – our load factors are the highest in the market right now. It (competing effectively against the Qantas Group) doesn't feel impossible from where I sit."
Jayne Hrdlicka also confirms passenger demand is now over 2019 levels and starting to come in line with where demand would have been expected to be had the pandemic not disrupted proceedings.
The Virgin Australia CEO admits the rebooted airline would never provide the international network its mostly Australia-based customers wanted. Partnerships were the obvious solution. Virgin Australia has recently teamed up with Qatar Airways, but late last year, they tore up a longstanding agreement with Delta Air Lines and switched over to United Airlines.
"We started with a blank piece of paper for the whole business," Ms Hrdlicka said. "You have to understand the market where you want to play and how you're going to compete in that spot. It became very clear to us we shouldn't be trying to do all things the way we'd done them before.
"We can't provide the international network for customers that they need. We needed to have the world's best partners to continue the experience execution that we started in Australia. United Airlines was the obvious choice for the US. They have the most number of services into Australia from the US, and they've been the longest standing and most committed airline partner from the US into Australia."
Ms Hrdlicka says a key challenge was getting Virgin Australia's costs down. The CEO is happy about where those costs are now. She warns rising fuel prices will see capacity discipline remain and ticket prices rise. But she says any ticket price increases won't cover the full impact of fuel price rises.
"That just doesn't work," says Jayne Hrdlicka. "We've got an obligation as an industry to ensure we get the world traveling again and that we get global connectivity back again, but we have to do it in a sustainable way. We've had two years of pretty extreme losses, so I don't think there's any choice but for the price to go up.
"It's not affordable for anybody anywhere in the industry for us (the airline industry) not to be able to start to return to profitability and get about generating good strong cash flows to build a better and stronger balance sheet."
Lead Journalist – Southwest Pacific -.A Masters level education and appetite for travel combine to make Andrew an incredible aviation brain with decades of insight behind him. Andrew’s first-hand knowledge of the challenges and opportunities facing Australian airlines adds exciting depth and color to his work. Andrew is based in Sydney.