"Australia"

Virgin Australia has announced its intent take over three Boeing 737 aircraft from struggling regional carrier Rex Airlines. The move comes as Rex entered voluntary administration yesterday, grounding its entire fleet of nine Boeing 737s.

Under the announced move, Virgin Australia would take over the leases for three of the ground Rex fleet of 737-800 aircraft.

Rex’s regional operations using smaller Saab 340 turboprops will continue, according to the administrators.

However, the airline has suspended all domestic flights between major airports. Thousands of passengers have been left scrambling for alternative travel arrangements.

A Move to Alleviate Delivery Delays

The acquisition of three Boeing 737-800s is a strategic move for Virgin Australia. The airline, like others, has been experiencing delays in the delivery of its new 737 MAX 8 aircraft.

The move to acquire additional readily available aircraft will help Virgin to alleviate its current capacity constraints.

To ease the disruption for affected travelers, Virgin Australia is offering free re-bookings for Rex customers on equivalent Virgin Australia flights. The airline advises passengers with upcoming travel plans to contact them for assistance.

Domestic Wings Clipped

Rex Group had originally acquired the single aisle Boeing 737s in 2021, with a bold plan to capture 30% of the domestic market share.

Up to present date, Rex had established its jet fleet on 13 domestic routes, however load factors were low, with reports of 50-55% rates.

Many will argue of the woes of a duopoly in Australia’s domestic market. However, the fact is that, despite being a massively big continent, Australia has a relatively small population.

In very broad terms, the Australian domestic market just isn’t that big. Rex Airlines’ financial difficulties highlight the challenges faced in the Australian aviation industry.

The airline’s collapse comes just months after the demise of low-cost carrier Bonza. Industry experts are now raising concerns about the potential impact on airfares as competition diminishes.

As administrators Ernst & Young work to restructure Rex Airlines, the future of the regional carrier remains uncertain.

While the airline’s Saab 340 regional operations are expected to continue, the fate of at least part of its Boeing 737 fleet is now in the hands of Virgin Australia.

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In a shift to its international operations, Virgin Australia has announced the cessation of its daily flight between Cairns and Tokyo’s Haneda Airport, effective February 24, 2025.

This decision comes as a direct response to the sluggish recovery of inbound tourism from Japan, which remains stubbornly at 35 percent below pre-COVID levels.

The Cairns-Tokyo route, inaugurated with much optimism in June 2023, has fallen victim to unforeseen economic challenges.

Chief among these is the persistent weakness of the Japanese Yen, which has dampened the enthusiasm of potential Japanese visitors to Australia.

This currency situation, coupled with slower-than-anticipated tourism recovery, has rendered the route commercially unsustainable for the airline.

Impact on Travelers and Refund Process

The cancellation affects approximately 2,000 passengers who had booked flights on this route beyond February 24, 2025.

Virgin Australia has committed to a swift and comprehensive refund process for these affected customers.

Passengers who booked directly through virginaustralia.com can expect to receive an email within 24 hours, detailing the refund procedure.

The airline aims to process these refunds efficiently to minimize inconvenience to its customers.

For those who secured their bookings through travel agencies or third-party websites, Virgin Australia advises contacting these providers directly.

These intermediaries will assist in processing refunds and help passengers explore alternative travel arrangements.

To ensure transparency and provide additional support, Virgin Australia directs affected customers to consult the airline’s Guest Compensation Policy and Consumer Guarantees page.

These are available on the airline’s official website. These resources offer comprehensive information on passenger rights and available options in such situations.

Despite the impending route closure, Virgin Australia assures its commitment to maintaining high-quality service standards on all remaining Cairns-Haneda flights until the final service date.

Corporate Perspective and Strategy

Alistair Hartley, Virgin Australia’s Chief Transformation and Strategy Officer, addressed the situation with a mix of regret and strategic insight.

“Our international network remains a cornerstone of our strategy,” Hartley stated. “The decision to withdraw from the Cairns-Tokyo route was challenging but necessary given the current market conditions.”

Hartley emphasized the airline’s ongoing commitment to the Japanese market through its partnership with All Nippon Airways (ANA).

This collaboration will enable Virgin Australia to continue facilitating tourism from Japan to Australia. This will include popular destinations like Far North Queensland.

In his statement, Hartley also acknowledged the crucial support of the Queensland Government in launching and sustaining the Tokyo services.

This recognition underscores the collaborative effort between the airline and regional authorities in promoting international tourism.

Future Operations and Aircraft Utilization

While the direct Cairns-Tokyo flight will cease, Virgin Australia will maintain a strong presence in the Japan-Australia travel market.

Through its partnership with ANA, the airline will offer up to 17 weekly flights between the two countries,. These will all be bookable directly through Virgin Australia’s platform.

This arrangement not only preserves travel options for customers but also plays a vital role in connecting Japanese tourists to various Australian destinations. This will include the ever-popular Far North Queensland.

Virgin Australia’s robust domestic network, which includes up to 13 daily flights to Cairns from major Australian cities, will continue to support this tourism flow.

737 MAX 8 Redeployment

In a move to optimize its fleet, Virgin Australia plans to redeploy the Boeing 737 MAX 8 aircraft currently servicing the Cairns-Tokyo route to its domestic schedule.

This reallocation of resources reflects the airline’s adaptive strategy in the face of changing market dynamics.

The airline currently operates seven fuel-efficient Boeing 737 MAX 8 aircraft, with plans to expand this fleet.

An eighth aircraft is scheduled to join Virgin Australia’s fleet in the coming month, further enhancing the airline’s operational capabilities and fuel efficiency across its network.

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Qatar Airways is reportedly in talks to acquire a 20% stake holding in Virgin Australia. The report, which was carried by the Australian Financial Review, has not been formally confirmed by either Qatar Airways or by Bain Capital, the owner of the airline Virgin Australia.

This potential deal could significantly impact the Australian aviation landscape, increasing competition and potentially leading to lower fares for travelers.

According to the Australian Financial Review, the interest by the Qatari carrier may be announced as early as next week.

Why the Interest in Virgin Australia?

Industry analysts believe Qatar Airways is looking to expand its presence in the Australian market. Previously, the airline’s efforts to secure additional flying rights were blocked by the Australian government in 2023.

Virgin Australia, on the other hand, is seeking ways to compete more effectively with Qantas, the dominant airline in Australia.

The two major carriers have maintained a long-standing duopoly in the Australian aviation market.

Partnering with a strong international player like Qatar Airways may be seen by some as a benefit for Virgin Australia.

A partnership with the Qatari carrier could potentially equip Virgin Australia with a strategic advantage over its rival.

According to the Australian Financial Review, a competitive advantage is not expected to be an immediate outcome. Relevantly, Qatar Airways and Virgin Australia already operate a code share agreement.

The Approval Hurdle

Even if supposed negotiations between the two airlines were to be successful, the deal still faces a crucial hurdle. Any such move would require approval from the Australian government.

The Foreign Investment Review Board will need to assess the potential impact on competition and national security before giving the green light.

Conclusion

Virgin Australia only recently moved back into the black, with the airline returning to profitability in FY 2023 after a decade of losses. In April 2020, the carrier went into voluntary administration, citing its inability to continue operations without a Federal Government bailout.

In November that year, it then became the first major Australian airline in history to exit voluntary administration.

Rebounding from the blow, it sought to maintain its pre-pandemic market share of roughly one-third of the Australian domestic aviation market.

Positioning itself as a mid-market carrier, Virgin Australia’s target has been maintained. As at March 2024, the airline is maintaining its planned one third market share, with Qantas claiming the rest.

If the deal for a Qatar Airways 20% stake does become a reality, it could potentially benefit Australian travelers in several ways.

Increased competition between airlines has the potential to lead to lower fares on both domestic and international routes.

While the initial reports of discussions appear to hold some credence, a financial stake holding would still require regulatory approval.

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The Australian Competition and Consumer Commission (ACCC) has approved a codeshare agreement between Virgin Australia and Air New Zealand.

This now offers travellers more options and potentially lower fares when flying between Australia and New Zealand (trans-Tasman routes).

Green Light for Trans-Tasman Codeshare

This decision follows the ACCC’s draft determination in May, which received broad public support.

Under the agreement, Virgin Australia can place its code on Air New Zealand flights operating on trans-Tasman routes originating in Australia (VA-coded services).

However, Air New Zealand will have the authority to set the fares that Virgin Australia can offer.

“This collaboration between airlines is expected to bring significant benefits to consumers by increasing competition and offering a wider variety of ticketing and pricing options,” said ACCC Deputy Chair Mick Keogh.

The agreement also allows Virgin Australia and Air New Zealand to jointly provide discounts and marketing initiatives for businesses.

Additionally, eligible Virgin Australia Velocity Frequent Flyer members will enjoy program benefits and access to international lounges on qualifying flights.

It’s important to note that this codeshare arrangement excludes routes where Virgin Australia currently operates or plans to operate its own services in direct competition with Air New Zealand.

“The ACCC believes these conditions effectively mitigate the risk of anti-competitive behavior arising from this agreement,” added Mr. Keogh.

Background Information

Virgin Australia primarily focuses on domestic and short-haul international flights within Australia and neighbouring regions.

Their current international destinations include Queenstown (New Zealand), Tokyo (Japan), Nadi (Fiji), Denpasar (Indonesia), Port Vila (Vanuatu), and Apia (Samoa).

Virgin Australia also has existing codeshare agreements with several airlines for long-haul international flights.

These agreements allow Virgin Australia to market and sell seats on flights operated by partner airlines, with the partner airlines setting the fares.

Air New Zealand, the national carrier of New Zealand, operates flights across the Pacific, Asia, and North America, in addition to its trans-Tasman services.

They are part of a larger airline alliance involving Star Alliance and 26 other international airlines, including United Airlines and Cathay Pacific.

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Virgin Australia marks a new chapter in Australian travel with the launch of direct flights between Melbourne and Uluru. This will be the first time the airline visits Australia’s iconic Red Centre landmark.

The inaugural Brisbane-Uluru service, will significantly boost tourism opportunities in the region.

The airline established the services in collaboration with the Northern Territory Government and Voyages Indigenous Tourism Australia. These will add a substantial 62,000 seats to the Red Centre annually.

This increased accessibility is expected to fuel the growth of the Indigenous tourism sector. This is a significant contributor to Australia’s national visitor economy, generating nearly $6 billion annually.

Notably, Ayers Rock Resort, managed by Voyages Indigenous Tourism Australia, already boasts over 30% of its workforce identifying as Indigenous or Torres Strait Islander. This makes it a leader in Indigenous employment within the Australian tourism industry.

Spirit of Place: Uluru

Virgin Australia’s Uluru services offer a convenient gateway for travellers from Victoria and Queensland.

Additionally, codeshare partnerships are in place with major airlines. Associations with Qatar Airways, Singapore Airlines, and United Airlines will connect Uluru to over 600 cities worldwide.

This seamless travel experience allows international tourists to explore Australia’s Red Centre with ease using a single ticket.

Virgin Australia will operate the Uluru flights using Boeing 737 aircraft, with up to 182 seats per flight. Cabin configuration offers a choice of Business Class, Economy X (extra legroom), and Economy seating.

To celebrate the launch, a special departure gate party will be held at Melbourne Airport for the sold-out inaugural flight.

Celebrity Guests and First Nations Artists

Australian World Music Star and renowned First Nations entertainer, Mitch Tambo, will perform alongside First Nations DJ, SVVLO.

This will take place at a special departure gate party the airline will hold at Melbourne Airport. Altogether, 182 guests will be travelling on the sold-out maiden flight.

VA1681, will depart Melbourne at 12:30pm, landing in Uluru at 3:40pm local time, for a welcome event at the Ayers Rock Resort’s famous Wintjiri Wiru platform. 

Headlining entertainment at the event will be Platinum-selling ARIA award-winning singer, Budjerah. He will surprise guests with a performance of his aptly named hit song ‘Ready For The Sky’.

Business, sporting, lifestyle and fashion personalities will also join the first flight from Melbourne. Names include Rebecca Judd, Natalie Bassingthwaighte, Jett Kenny, Michelle Bridges and more.

Industry Leaders Celebrate the Launch

Virgin Australia CEO Jayne Hrdlicka expressed her enthusiasm for this momentous occasion. “Uluru is a cornerstone cultural landmark and a beloved holiday destination,” Ms. Hrdlicka stated.

“We are proud to connect Australians to Uluru and offer more value and choices to travellers. This relaunch is fantastic news for our staff, tourism partners, guests, and Velocity members who can now earn and redeem points on these services.”

The launch was also met with positive responses from industry leaders. Voyages Indigenous Tourism Australia CEO Matt Cameron-Smith highlighted the significance of the event.

Meanwhile, NT Minister for Tourism and Hospitality Joel Bowden extended a warm welcome to Virgin Australia and its passengers.

Melbourne Airport CEO Lorie Argus emphasized the new service’s role in expanding travel options for exploring Australia’s vast interior.

Virgin Australia’s Uluru flights take off just as the Northern Territory’s peak tourism season begins, offering a timely opportunity for travellers to discover the wonders of Australia’s Red Centre.

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