Caught in the middle between full-service Qantas and low-cost JetStar, Virgin Blue is edging away from its low-cost model in a bid to attract more business and international travellers.
The latest evidence of this shift comes with its decision to install LiveTV in-flight entertainment and an announcement that it may replace its IT system so it can interface with systems at other airlines.
The new scheme, set for launch by mid-year, will be on a user-pay basis, but it adds another offering to Virgin Blue's menu of user-pay service upgrades that already include valet parking and pre-selected seating. Low-fare carriers are increasingly focusing on these ancillary revenues to supplement ticket sales. The potential change in IT systems could pave the way for booking Virgin Blue flights on partner airline websites or vice versa, and interlining baggage. Neither is currently possible, which discourages foreign travellers from using Virgin on domestic sectors. "Virgin is now moving towards being a hybrid - rather than a mere low-cost/no-frills - airline," notes Sydney-based consultancy, the Centre for Asia Pacific Aviation.
The arrival of JetStar, the low-cost Qantas domestic brand, is accelerating Virgin Blue's shift. Qantas has upgraded domestic service to differentiate it from JetStar, and Virgin Blue seems to be following suit. Forty percent of Virgin's customers are already business passengers. Its costs are still close to JetStar's, but Virgin concedes that it needs to boost yields. Chief executive Brett Godfrey says that leisure travellers will continue to find low fares comparable to JetStar's, but Virgin is analysing routes and flights to see which ones will support fare increases. "If we get the chance to charge more on a business-related flight or peak, we'll do that," he says.
This shift in emphasis prompts transport analysts at Merrill Lynch Australia to observe that "the Virgin Blue domestic franchise is in the early stage of becoming a reincarnation of Ansett".
David Knibb Brisbane
Source: Airline Business
