Headlines yesterday that Virgin Australia (VA) has overtaken Qantas as the most flown domestic carrier initially looked like red herrings. But there is far more to the story.
The latest ACCC Domestic Airline Competition in Australia report, which focuses on Dec 2024, awarded VA a 35% market share, inching in front of Qantas on 34.6%, with a gap back to Jetstar (JQ) on 29% and then the shrunken Regional Express (Rex) on 1.4%.
Maybe it is not surprising that VA stripped QF of the crown. After all, Dec is a month dominated by leisure travel, not business. And in a cost-of-living crisis, those extra dollars spent getting on to QF metal for the sake of some bonus flyer miles and status, when airfares are already relatively high, is perhaps not fiscally sound. Historically, QF generally sees a dip around Dec.
VA was able to add extra flights to locations such as the Gold Coast, Sunshine Coast, Cairns, Tasmania, and the Whitsundays, in part thanks to taking the lease of three Beoing 737s from Rex.
Furthermore, the collapse of Rex and its abandonment of major city routes allowed VA to mop up a decent amount of its small passenger numbers. Since its Jul demise, VA’s share of passengers increased by 3.1 percentage points to 35.0% in Dec 2024. The environment was ripe for VA to produce this result.
Is this a sustainable result?
While this may look like a single report anomaly, there is reason to believe that, after QF likely restores its lead in the next report, the gap will be much smaller and VA may stand poised to take the lead again down the track.
Consider that last Dec, despite another big drop, QF still managed to maintain its number one position. And that in Dec 2022, its passenger number drop was minimal.
Also consider that in Dec 2023, Jetstar actually managed to overtake VA for position two.
The expectation was not for VA to take the lead.
Despite being Qantas Group’s leisure focused airline, JQ was not able to repeat the leapfrogging of VA in the Dec just gone. From May onwards, VA managed to establish a gap to JQ that on average continued to grow during the year. Although JQ registered a Dec spike, it wasn’t enough to overhaul what was now a considerable margin.
It is that continued, gradual, passenger growth that could see VA in a position to genuinely take the number one position in passenger share longer term.
Breaker, breaker…
Outside of the ACCC report yesterday, travelBulletin sister title Travel Daily sent out two breakers in quick succession regarding VA.
The first was heralding the codeshare agreement between Australia’s second major airline and international carrier Air India that would see easy transition between Air India flights landing in Sydney and Melbourne from Delhi and Mumbai to 15 cities across Australia, plus Queenstown in New Zealand, the latter subject to regulatory approval.
This is a big win for VA. While the impact of code sharing with an international airline that is a) relatively unknown to Australians and b) only has 17 flights per week to Australia (soon to be less when Mumbai-Melbourne shuts for the off-season) might seem small, the key is its leader and his long game.
Since 2022, Air India has been run by renowned airline boss Campbell Wilson. He’s the brains behind Scoot’s launch and its formative years. In fact, he’s had two stints as the Scoot head honcho. He’s spent a significant amount of time at Singapore Airlines as well.
Wilson’s plan for Air India and Australia is big. In a recent interview with the AFR, he suggested that Australia was Air India’s third priority market – after the behemoths that are North America and Europe. He also suggested that he would like to increase flights to double daily on Sydney and Melbourne, and launch into Brisbane as well.
What’s stopping him? Aircraft. Air India needs more, but with over 450 orders on the books with both Airbus and Boeing, they are coming.
Australia’s Open Skies agreement with India means that if a spanner is thrown into the works of the AI expansion plan, it won’t be down to government bureaucracy. Air India, and to be fair, Qantas, which also connects Australia and India directly, can add flights as they see fit.
For the sake of argument, twice daily into Sydney and Melbourne and daily into Brisbane is 35 flights per week on large aircraft like the Boeing 777 or Boeing 787 – that is a significant amount of opportunity for VA that could open up thanks to that codeshare.
Consider these stats from Tourism Australia to back that up – arrivals from India for the year ended November 2024 were at a record 434,000, up 12% YOY.
“There’s increased appetite to travel amongst the young Indians and factors like generational shift, attitudinal shift and events globetrotting will continue to drive outbound travel, which, as per CAPA and McKinsey is expected to reach 50 million by 2030 and 90 million by 2040 respectively,” a Tourism Australia report stated.
QR mega deal edges closer
The second breaker was the draft approval by the ACCC granting authorisation to VA and Qatar Airways to engage in cooperative conduct under an integrated alliance for five years.
ACCC commissioner Anna Brakey said, “We consider that the proposed cooperative conduct would likely result in several public benefits including providing enhanced products and services for air travellers which would include increased choice of international flights, with additional connectivity, convenience and loyalty program benefits for consumers.”
The final decision is likely in Mar or Apr, but there is very little now standing in the way of a deal that will well and truly see VA back in the international spotlight, initially using Qatar Airways planes and crew in a wet lease arrangement.
In a statement, Australian Airports Association CEO, Simon Westaway, said, “We’ve just experienced likely the busiest holiday period ever seen at our airports and aircraft capacity for intercity routes is stretched thin. The AAA joins the ACCC in urging airlines to increase seating capacity to meet rising demand.
“The proposed Virgin-Qatar deal is a crucial opportunity to improve airline competition, capacity and jobs creation. We look forward to the Federal Government’s prompt approval process for this alliance.”
VA has already, pending approval, committed to Sydney-Doha (VA1/VA2), Perth-Doha (VA21/VA22), and Brisbane-Doha (VA15/VA16) from mid-late Jun this year, and last month registered Melbourne-Doha (VA7/VA8), set to take off in Dec this year.
If the equation for a compelling and successful Australian airline is strong global connections into a healthy domestic network, then VA seems to have built that with AI and QR, as well as its other partnerships with Air New Zealand, Hawaiian Airlines, United Airlines, Singapore Airlines and more.
Tuesday 18 Feb 2025 will be a day fondly remembered by the management team at Virgin Australia. Whether it will be remembered outside of 275 Grey Street, South Brisbane, is up to VA and how it takes advantage of a rapidly fluctuating market where the reputation of the major Australian airline is still suffering.
Oh, and that small matter of its leadership transition. Ahem…
