Why Virgin Australia failed - and what comes next

Virgin Australia went into voluntary administration this morning but CEO Paul Scurrah says the carrier is determined to keep flying and play a key role in getting the Australian economy back on its feet after the Covid-19 pandemic.

Accounting firm Deloitte has taken over the running of the airline with Virgin continuing to operate its Government-backed scheduled international and domestic routes.

Virgin’s directors said they “regret that these events have come to pass and acknowledge all the group’s employees for their hard work and contribution”.

One of the administrators, Vaughan Strawbridge, said his team was “progressing well on some immediate steps” after the Government declined to step in save the airline and its 10,000+ employees.

Administrators are seeking interest from parties for participation in the re-capitalisation of the business and its future, with several expressions of interest so far.

Virgin founder Sir Richard Branson said: “This is not the end for Virgin Australia and its unique culture."

He added: “We will work with Virgin Australia’s administrators and management team, with investors and with Government to make this happen and create a stronger business ready to provide even more value to customers, competition to the market, stimulus to the economy, and jobs for our wonderful people.” 

Virgin Australia is owned by Etihad (20.94%), Singapore Airlines (20.09%), Nanshan Group (19.98%) HNA (19.82%) and Branson (10.42%) so any deals will be complicated ones.

Holders of Virgin Velocity frequent flyer points have been told their points are safe as Velocity is a separate business and not in administration. I wouldn't hold my breath.

I, for one, and not surprised by Virgin Australia's demise - and that is not hindsight.

Here is a piece I published on this blog in August last year, well before Covid-19:
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Virgin Australia is blaming a "tough economic environment" for its financial woes. I say it should blame its own dishonesty and its lack of support for loyal customers.

I was a Virgin Platinum frequent flyer and always chose Virgin, but now fly with whichever airline has the most convenient schedule or cheaper flights, pushing me down to gold, and soon to silver.

My reason for abandoning Virgin as my first choice came down to several reasons.

1. Former CEO John Borghetti promised a Virgin lounge in Hobart eight years ago. He lied and we are still waiting. That means I lose the value of being a lounge member one flight in two on every return trip I make from my home base.

2. I was unwell and unable to fly for several weeks last year. That cost me my platinum status. I asked Virgin for a dispensation and was refused.

3. Virgin started selling the front-row seats in economy to all-comers. So instead of frequent flyers being in rows 3-4-5 they found themselves pushed further and further back.

4. Lounge quality fell further and further behind Qantas with even basics like newspapers and magazines hard to find in lounges (Melbourne particularly).

5. There is a meanness about the offering. The "snacks" on my two flights today weighed 28 grams and 20 grams respectively. And back when I was platinum it was often impossible to use the allocated upgrades because either I was on the wrong fare type, or business class was full.

I know of at least three regular FFs who no longer choose to automatically fly Virgin. And there are certainly many more.

So there is a reason for Virgin losing money it made from once-loyal customers.

Virgin Australia now says it will review its flights and slash 750 jobs after posting a “disappointing” full-year loss of $349.1 million.

The airline said it would restructure its operations and look at everything from how it uses its planes to individual routes after posting its seventh annual loss.

Wednesday’s figures came despite Virgin’s revenue for the year to June 30 rising 7.5%.

The results are an improvement on the previous year’s $653 million loss, but it is still Virgin Australia’s third-worst performance.

Virgin will cut head office and corporate positions as it tries to save money.

“There is no doubt that we are operating in a tough economic climate with high fuel, a low Australian dollar and subdued trading conditions,” Virgin Australia chief executive Paul Scurrah said.

Maybe you'd fancy a chat, Mr Scurrah. I'm ready and waiting. --

I never heard from Mr Scurrah and now have 130,000 Virgin Australia frequent flyer points that I may never get to use. My bad. I knew this was coming. 

Cruising will bounce back says travel industry heavyweight

The cruise industry has been among the hardest hit sectors of the travel business during the Covid-19 crisis - and many commentators have cast doubt on its long-term future. 

With the Ruby Princess (below) at the centre of the epidemic in Australia and oodles of poor publicity, cruise lines will need to work hard to regain consumer confidence when life returns to normal. 




It may seem like over-confidence, then, when HelloWorld Chief Executive Officer Andrew Burnes says he’s confident that despite the current negative publicity around cruising, the sector will return stronger than ever. 

Writing to members of Helloworld’s Australian travel agency networks, he warned that the re-emergence of international travel could be 9-12 months off, suggesting destinations such as New Zealand and possibly some South Pacific countries could be among the first to open up to Australians.

“I never thought I’d be looking forward so much to hearing someone say bula to me as I do now,” he joked. 

Asked whether cruise demand will return, Cruise Weekly reported Burnes as saying: “My answer is of course it will. 

"Cruise has proven to be one of the most popular sectors of the leisure travel industry in the world...the product is popular, well-priced and delivers an all-inclusive break that people enjoy”. 

Burnes said cruise companies will have to undertake significantly increased cleaning and disinfecting measures, as well as committing to much better on-board health facilities including immediate isolation capabilities, respirators and other near-ICU facilities, as well as stringent health checks for all embarking and disembarking passengers, and crew.

 “The cruise companies will address these issues over the next 12 months,” he said. “I firmly believe cruise will come back, most likely from mid-2021 and beyond, once the operators have sorted out their safety and health issues.” 

Rapper Snoop Dogg links with Australian wine label

In one of the more bizarre commercial links in recent years, American rapper Snoop Dogg has collaborated with Australian brand 19 Crimes to produce a new wine.



Dogg's visage will decorate the label of a red blend from California, which is due to hit retail shelves late this year.

The wine will be known as Snoop Cali Red and is a blend of 65% durif, 30% zinfandel and 5% merlot.

It will retail in the US for $12 and the label features a monochrome photo of the West Coast rapper in a hooded jacket.

The 19 Crimes brand, which features augmented reality labels, originally featured photos of "convicts turned colonists that built Australia" so the decision to use an American rapper with no links to Australia is a strange switch.

Brand owner Treasury Wine Estates said it felt Snoop Dogg was a good fit for 19 Crimes as he “embodies the same spirit of rule breaking, culture creating and overcoming adversity that inspired 19 Crimes’ original cast of rebellious heroes”.

“I’ve been a fan of this wine and I’m excited to unveil my Snoop Cali Red this summer and share the experience with all my fans," Dogg said.

Snoop Cali Red

That is a surprise as Dogg has been known to smoke cannabis and has several drug convictions and firearms offences on his record but has never before been known as a wine aficionado. The deal is described as a "multi-year" one.

“It’s one of the most successful brands in the market, so I’m more than eager to bring this collaboration to the world,” Snoop Dogg said of the partnership.

John Wardley, TWE’s marketing vice president, Americas, said in true market speak: “An entertainment and California icon, Snoop Dogg is the perfect partner for 19 Crimes. We are truly excited to welcome him to the 19 Crimes family.”

The brand pays homage to the thousands of British men and women who were exiled to Australia in the 18th century for committing one or more of the 19 crimes. Dogg was once refused entry to Australia on character grounds - so maybe the link makes some sense.

Dogg, real name Calvin Broadus, is 48 and has since sold over 23 million albums in the United States and 35 million albums worldwide.

Two international hotels for Western Sydney

Western Sydney is to get two brand-new international hotels. 

 
Marriott International has announced the signing of Courtyard by Marriott Sydney in Auburn (above) and Four Points by Sheraton Sydney, Blacktown in an agreement with Sydney-based property developers, Mr Ning He and Timothy He, Directors of T1 Constructions.

The properties are slated to open in 2023 and 2024 respectively and mark the planned expansion of the Courtyard by Marriott and Four Points by Sheraton brands in Australia.

“These latest signings reflect Marriott International's strong commitment to the travel and tourism industry here in Australia," said Richard Crawford, Senior Director of Hotel Development, Australia, New Zealand and the Pacific for Marriott International.

"During these unprecedented times, our ongoing goal remains to grow our business and to strengthen our offering in this region. With these signings in Auburn and Blacktown, we are doing just that, and strategically expanding our footprint into growth corridors outside Australia's metropolitan areas.

"Auburn and Blacktown are rapidly growing communities, with a range of demand drivers for visitor accommodation. Marriott International is therefore pleased to collaborate with T1 Constructions to deliver what will be outstanding developments as we move into this exciting new phase of our expansion.”

Courtyard by Marriott Sydney, Auburn will be located at St Hilliers Road, Auburn, close to the Parramatta River and Sydney Olympic Park. There will be 203 guest rooms, an outdoor pool with a sun deck, and a modern fitness centre complete with sauna and steam rooms.

It will also feature several of the Courtyard by Marriott brand's signature amenities: The Bistro, an all-day, fast-casual restaurant featuring live stations, a collaborative lobby lounge space, for guests to unwind, relax and socialise as they please and the 24/7 Market – a grab and go café serving bakery items and pastries.

Four Points by Sheraton Sydney, Blacktown will be at 17-21 First Avenue, Blacktown, providing easy access to downtown Blacktown.

There will be 206 guest rooms, an all-day dining venue, a grab and go café featuring coffee and pastries and a lobby lounge space. There will also be an outdoor pool and spa and a fitness centre.

Leading tour company refusing refunds

One of Australia's biggest travel companies has retrospectively changed its refund policy to deny refunds to customers whose trips were cancelled due to Covid-19.




Topdeck, which is one of Australia’s biggest youth travel operators, altered its refund policy and has applied it retrospectively to deny refunds to customers for trips that were cancelled due to the pandemic.

Like most operators, Topdeck has been forced to cancel all tours until mid-2020 at the earliest.

It promised travellers refunds for cancellations but last week told customers it had “updated” the refund policy, and would now only be giving credit for future travel, plus an additional $100. The credit expires in December 2021.

Some customers previously promised a refund were denied one, The Guardian reported.

The Australian Competition and Consumer Commission website says: "If you had a right to a refund under these terms and conditions at the time you purchased your ticket, businesses are not permitted to change the terms at a later time to deny you a refund."

Founded in 1973, Topdeck is a tour operator providing trips for people aged 18 to 39 throughout Europe, North America, Africa and the Middle East, Australia, New Zealand and Asia. Topdeck offers 330 different tours in 65 countries.

It looks as if Topdeck is being tricky here - and this could get messy.

Positive news for the Australian wine industry, but.....

The value of Australian wine exports continued to grow in the 12 months to March 31, 2020, but Wine Australia reports that the full impact of Covid-19 on exports is still to be felt.

Wine Australia Chief Executive Officer Andreas Clark said total export value increased by 3% over the previous 12 months to $2.87 billion with a record average value for bottled exports of $7.12 per litre free on board (FOB).

Over the same period, total export volume declined by 11% to 728 million litres (81 million case equivalents) as there is now less wine available due to lower vintages in 2018 and 2019.

Although not yet complete, it is clear that vintage 2020 is delivering exceptional quality fruit but yields are down so it is anticipated that inventories will continue to be depleted.

"Pleasingly, the average value of Australia’s unpackaged wine exports increased by 5% to $1.26 per litre – levels not seen since late 2005," Clark said.

"This reflects the continued demand for Australian wine even in a more competitive bulk wine market and this is flowing through to increased returns for grape growers in the critically important inland regions of the Riverland, Murray Valley and Riverina."

Clark warned that the Covid-19 pandemic would take a toll on exports, but due to the patterns traditionally seen in wine exports and with the situation evolving on a daily basis in major markets such as the United Kingdom and the United States of America it was too early to get an accurate picture.

"Sales data from the UK and USA suggests that while cafes and restaurants have closed and sales have been lost, it’s been offset by people buying more wine for at home consumption," he said.