Home' Australian Aviation Magazine : January February 2010 Contents 31
JANUARY/FEBRUARY 2010 AUSTRALIAN AVIATION
switch on any capacity until June of next
year (2010); we may switch on quite a bit
sooner. We do want to see fares rise, we
think the market needs to see that, but
we've got this inherent flexibility for the
first time, we've got five aeroplanes that are
floating around in the system sub-optimal-
ly, and at in excess of $50 million a pop you
don't want those things laying idle."
Better still, says Godfrey, is that much of
Virgin Blue's improved fortunes have come
at the expense of the Qantas Group.
"We've seen a noticeable improvement
and Qantas hasn't. We model our yield and
monthly movement in yield versus Qantas.
Domestically they're still 10-12 per cent off
on a group basis. So that means Qantas is
off probably 15 per cent, maybe Jetstar is up
a little, whatever it is, but the net result is
10-12 per cent. (But) We're slightly better
than last year. What that says to me is that
we're seeing this 'flight to value' exemplified
or magnified, we're seeing that traffic finally
come to us."
at he attributes to the maturing of the
New World Carrier strategy that has seen
Virgin Blue morph away from a traditional
low cost carrier.
"We're becoming this fully integrated
network player and as a result we are seeing
additional traffic come our way because
we do the connecting bags, we have the
frequency, we have lounges," Godfrey
"Our corporate revenues are up 20
per cent year over year; our government
revenues are up 22 per cent year over
year on what has been largely a declining
market. So where's it coming from? It's not
new because the market's actually shrunk.
We know the market's probably off about
five or six per cent -- that's the business
market. Leisure has held up a bit better,
believe it or not. Qantas will tell you that
the front of the plane is empty. Well, it
may be empty there but it's not with us.
We've seen an improvement in premium
economy so what we've seen is the flight
to value, and we think that's because of the
type of model we have."
It is here that the difference in busi-
ness model strategies between the Qantas
and Virgin Blue groups are most stark.
At a November address to the National
Aviation Press Club Alan Joyce jokingly
lampooned Virgin Blue's New World
Carrier strategy as a "lost world" carrier
strategy, given that Virgin Blue is neither
fish (ie a full ser vice premium airline), nor
fowl (a pure low cost carrier).
"At the end of the day I think if there's
a lost world model out there, it's got to be
Qantas, mainly because they haven't grown
in the last two or three years," Godfrey
quipped in response. "All the marketshare
that Jetstar has grown to has come from
Qantas, it hasn't come from us. So if there's
a dinosaur model out there, I'm sorry, it is
Certainly Virgin Blue's ability to evolve
has shown that it is no lumbering dinosaur.
"Every airline, if they're smart, will look
at their own home market and say 'How
best do we take advantage of the situa-
tion?' Ansett failed so why should we be an
LCC?" Godrey said of the background to
the New World Carrier strategy. "When
Ansett had such a huge marketshare and
opportunity, why wouldn't we take the stick
to Qantas if we possibly could, knowing
full well that another LCC was going to
come into the market at some stage in time
anyway? As soon as Jetstar came in, we
didn't want to sit and play in that area.
"I've said this a thousand times and no
one can convince me other wise, when it
comes to LCCs your loyalty is purely price,
there's no two ways about it. Whereas with
us, we've got more guests who fly us from
choice and they will pay more for that."
Godfrey is also at pains to point out
that Virgin Blue's product offering it has
introduced as it has pursued the higher
yielding corporate/business market, from
lounges to premium economy to the
Velocity frequent flyer scheme, are all
positive revenue generators.
And that focus on pursuing the business
market is not to say Virgin Blue is walking
away from the budget end of the market.
At one point VB had looked at establish-
ing an 'ultra' low cost carrier as one way of
better competing with Jetstar, but instead,
under its Airline of the Future plans may
instead see VB aircraft flying domesti-
cally with three classes, not just the current
premium economy and standard economy,
but at the back of the aircraft with a budget
economy with a tighter seat pitch.
"We've got this Airline of the Future
concept which will probably see the pos-
sibility of having on the same aeroplane
LCC, economy and premium economy in
the definitions of what we would typically
understand what is an economy on a legacy
carrier," Godfrey explained.
But that Airline of the Future strategy
is likely to be implemented by the airline's
CEO of the future, with Godfrey's depar-
ture looming in 2010.
Post VB, Godfrey's plan is basically to
have time off, spend more time with his
family, and take a step back from the pun-
ishing schedule of running an airline.
But it is hard to see the almost hyperac-
tive Godfrey, a known early riser to indulge
his cycling passion, taking things too easily.
"I'm not that old and I get bored really
easily so I'll be doing something!"
SLEEPLESS NIGHTS The prospect of staff redundancies was the most stressful time for Brett Godfrey as
CEO -- pictured here with VB flight attendants at the September 2007 publicity launch of Canberra-Sydney
"We've seen this flight
to value, and we think
that's because of the type
of model we have."
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