Richard Branson serves a broadside at Qantas

Richard Branson serves a broadside at Qantas

Five years ago and from half a world away, Sir Richard Branson watched as the battle between Qantas and Virgin Australia – then newly rebranded from Virgin Blue – reached epic and arguably out-sized proportions.

Yet it held clear echoes of an older and more familiar home-ground fight between British Airways and Virgin Atlantic, another tale of ‘incumbent versus challenger’.

“They were very very similar,” Branson told Australian Business Traveller at the launch of Virgin Australia’s Melbourne-Hong Kong route, which sees his local franchise square up against Qantas and its Oneworld frenemy Cathay Pacific.

Too high a price for competition?

Branson was struck most “by the way Qantas behaved a couple of years ago, pouring hundreds of millions of dollars” into a domestic capacity war and then asking the federal government for financial support.

Branson, whose Virgin Group retains a 10% stake in Virgin Australia, sledged Qantas for petitioning Canberra with a "begging bowl” in 2014.

“It showed just how desperate they'd got in trying to drive us out of the market place.”

“They had to go cap in hand to the government (who) quite rightly told them that it’s up to them to compete on a fair, level-playing field.”

“But the very fact that the government even considered their request worried the living daylights out of me,” Branson confessed. 

“I sat up late at night in the UK helping to draft advertisements and writing letters to ministers and the Prime Minister, because some of the words that were coming out of the government were truly worrying.”

“Thank God the government didn't give them any money… if they had, I don't know whether Virgin Australia would have survived, when you’d suddenly have an airline that has become a state-sponsored company getting billions of dollars, and the smaller competitor isn’t getting that.”

The cost of the 'capacity war'

Branson says Qantas’ request for a multi-billion dollar bail-out was the airline’s own fault, after it sparked an unsustainable capacity war in rostering more flights and larger aircraft on routes which couldn't support the sudden increase in seats without ticket prices and revenue taking a dive.

The then-CEO of Qantas’ domestic arm pledged that “if a competitor puts one (plane) in, we'll put two in as a group” – and the airline went to extremes such as scheduling a Boeing 747 jumbo jet onto the Sydney-Perth route.

“It only cost them a lot of money, and it obviously cost us a lot of money,” Branson reflected.

“Finally sense prevailed and Qantas then started competing in a more normal way, on quality and on price.  And that sort of competition is completely fair." 

“Qantas is now making good money, which proved they did not need those billions they were asking the government for, and Virgin Australia should soon start making good money as well."

"Two great airlines is better than one"

Virgin Australia CEO John Borghetti – a 30+ year veteran of Qantas who rose from the mailroom to the executive suite before taking the helm at the airline’s arch rival – describes those days as “the capacity war we had to have.”

“I’m not taking anything away from Qantas, they're a great airline, but it’s better to have two great airlines instead of just one,” Borghetti reasons.

“And when you think back, when did Australia really have a second international carrier? Ansett was only there for a little while." 

“Now we have flights from Sydney, Melbourne and Brisbane to Los Angeles, and Hong Kong is our spearhead into Asia,” Borghetti explains. 

“I don’t see a situation where in three years we are not operating to Hong Kong, to two places in China and another place in Asia. I just can’t see that not happening.”

The airline has come a long way from the Virgin Blue era, “and this is a long game” Borghetti reflects. “It’s involved a lot of hard work by everyone here, but the hard work of transforming the airline has largely been done.”

“We’ve invested significantly in the transformation, and growing the company has been effectively done on debt. Our focus now is to reduce our debt and improve our gearing, and we are well on track for that.”

David Flynn travelled to Hong Kong as a guest of Virgin Australia

David Flynn
David Flynn is the editor of Australian Business Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.
 

41 comments

  • moecat

    moecat

    7 Jul, 2017 05:11 am

    Virgin will always be a low cost airline in the eyes of many Australians 
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    large, iM

  • Jurgen Schaub

    jurgen

    7 Jul, 2017 07:14 am

    Yes, it's really tricky to shed the 'cheap' image if that's how things started. Hyundai (for example) is trying this now. Toyota - once the cheap upstart compared with GMH and Ford - has pretty much done this now. It takes decades though.
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    David

  • Scott Bennett

    Bennett_s

    7 Jul, 2017 07:02 am

    People see right through this. Easier to blame QF then the failings of his own management team. Poor form. Unlike QF who didn't receive a bailout in 2014, VA is only around now because high profile, foreign shareholders have poured hundreds of millions into keeping it breathing. Maybe Mr Branson ought to spend his time coming up with innovative ways to become profitable rather than slagging off QF. 
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    RMITLad, iM

  • worldwanderer

    worldwanderer

    10 Jul, 2017 03:32 pm

    Poor form by Branson indeed. Qantas didn't request a bailout. 

    Qantas asked for a level playing field, and still didn't get one, and still don't have one.

    Virgin has been promising a profit for as long as I can remember and I still can't see one on the horizon.
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    iM

  • Smith

    RMITLad

    7 Jul, 2017 08:49 am

    I think the classier higher road is to acknowledge your competition and appreciate they prevent complacency and be confident in your ability to compete. Slagging out a competitor is poor form.

    Perhaps if there was no QF sales act QF could be foreign owned and propped up too, like VA. How many bailouts have they got from Etihad, Singapore, now HNA, and NZ back in the day. No company is perfect.
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  • Graham BLAMEX

    BLAMEX

    7 Jul, 2017 09:13 am

    If Virgin wishes to release itself from the discount carrier like Jetstar they need to totally re-brand. That is change the name and enhance the product to be at least at the same level as QF or better. Then they will secure the Corproate high yeild customers
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  • langdonfm

    langdonfm

    7 Jul, 2017 04:49 pm

    Their Economy Class, Premium Economy and Businsss Class product is already arguably objectively superior to Qantas' (in economy and business it is undoubtably superior). What part of their product is falling short of Qantas?
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  • AnthonyvB

    AnthonyvB

    7 Jul, 2017 04:54 pm

    QANTAS international travel economy food / entertainment etc is far superior than Virgin.  Also much prefer 13+ hours on a A380 vs 777
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  • Andrew

    andyf

    7 Jul, 2017 06:52 pm

    No way. The config of the Virgin 777 is far superior to the Qantas A380 in both business (direct aisle access, reverse herringbone) and economy (3-3-3 seats with 18.5" width) and arguably in premium economy as well (better leg room but lack of calf rest).
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  • AnthonyvB

    AnthonyvB

    7 Jul, 2017 08:25 pm

    Well I flew Virgin to the USA in February and QANTAS in April and from my experience and opinion much preferred seating in QANTAS. 
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  • Paul Coniglio

    Paul_in_melb

    8 Jul, 2017 09:58 am

    Used to be 
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  • Anthony Thompson

    triumph8

    10 Jul, 2017 03:36 pm

    How often do you actually travel internationally? Qantas is the bottom of the pile both comfort and food wise these days, though i know that the qantas social media people will combine and vote down this post the truth needs to be told that Qantas is a shadow of its former self, i travel internationally monthly to asia and europe turn about and i always wince when i see that i am on Qantas.
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  • AnthonyvB

    AnthonyvB

    10 Jul, 2017 03:47 pm

    I have flown 45000 miles in the last 6 weeks.  Singapore Airlines, Virgin and Qantas and as I mentioned before, in my opinion I find the offering by Qantas as an international economy flyer is far better than Singapore or Virgin.  
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  • worldwanderer

    worldwanderer

    10 Jul, 2017 04:25 pm

    triumph8 - quote:"Qantas is the bottom of the pile both comfort and food wise these days".

    One of the most ridiculous comments made on the ABT site that I can recall. 

    Have had 41 non-Aussie Domestic flights in last 5 years on 16 Airlines. Unlike many on here I most often travel economy with PE as an occasional long haul treat. 

    Aside from an outstanding 2016 flight on AirNZ in PE returning from LA to Auckland, out of all the other airlines I travelled in that period I would rate the Qantas International Economy as equal first . After 5 dreadful flights on Emirates Y over a 12 month period (after which I vowed never to travel with them again), getting on QF10 at Heathrow to return home to Melbourne was a godsend.
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  • 11sjw

    11sjw

    8 Jul, 2017 06:38 pm

    Lounges, the lack of an alliance and no Int F for a start.
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  • bert

    bert

    9 Jul, 2017 11:38 am

    virgin economy class food is now terrible, has gone backwards in a big way over last 5 years. Qantas economy class food seem big improvements, though exception recently is the pulled pork and wedges, great idea is just not practical for plane flights. At least they are trying to innovate.
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  • worldwanderer

    worldwanderer

    10 Jul, 2017 03:41 pm

    Surely langdonfm you are joking.

     
    The thing they call a meal/snack service? Have to pay for a soft drink? No pillows.
     
    Bumped me off two flights in a row at Brisbane airport for 4+ hours with a voucher that wouldn't even pay for half a burger. No apologies, no service, confused staff running around like chooks with their heads off.
     
    On the few occasions I've needed to travel with Tiger, I had better experience on Tiger than Virgin (although occasionally worry if I'll actually make the destination). At least I know I'm getting and PAYING for no frills service.
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  • CQ

    MEL Traveller

    9 Jul, 2017 10:23 am

    "If Virgin wishes to release itself from the discount carrier like Jetstar they need to totally re-brand. That is change the name and enhance the product to be at least at the same level as QF or better."

    Um, isn't this what they did five years ago?
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  • Doubleplatinum

    Doubleplatinum
    Banned

    7 Jul, 2017 10:20 am

    Typical example of the phrase money can't buy class
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    grumpytravel

  • Charles

    SteveCF

    7 Jul, 2017 01:39 pm

    I think Branson shot himself in the foot here. He's just highlighted that Qantas turned itself around to a profitable and competitive airline whilst considerably improving its product without any government help. Can't say what he's trying to prove here? Because it also highlights that at the same time VA hasn't been able to do the same.

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  • AnthonyvB

    AnthonyvB

    7 Jul, 2017 02:33 pm

    He really needs to back up his comments with facts.  Yes, Virgin being in Australia does help with competition however 90% of service they provide is mostly below par.  I am a Virgin Platinum and have been for many years but have started the switch over to QANTAS (just hit gold).  Reasons being

    *International flights to/from the USA - as much as the seats are good on the 777's, the food in economy is terrible.  Every few months seems to be a different lounge to visit and as I live in Adelaide the connecting times are terrible.  I have now done 2 USA trips on QANTAS and just booked one for August, seats are fine, food is actually pretty good, IFE selection is supreme, same lounge everytime and fantastic connecting flights to Adelaide.  Also must say do prefer the Sydney > Dallas run as I always need to to the east cost of the USA

    *Domestic lounges - in short they are just terrible in comparison.  If I have to have one more cheese and ham sandwich I will scream

    *Onboard Domestic - must say the new Economy+ seats are really good, but I know it is only a small thing but having to pay for a can of coke (as a Platinum member) really bugs me.  Also the 'snack' they serve, don't know why they bother.

    *Partner Airlines - as I travel to Singapore every 4 weeks, I have always taken the SQ278/279 direct flights ex Adelaide.  Singapore Airlines economy service is progressively getting worse.  Food is terrible, staff are robotic and honestly the lounge in Terminal 3 is below average (and that is being kind, having to leave the lounge to go to the toilet...come on!!)    

    For me, QANTAS are winning the war hands down (even despite their recent charging for extra leg room seats for top tier flyers)  I find their service and staff fantastic

    Again this is just my opinion from my observations as a very frequent economy class flyer (did just under 40'000 miles in June) and QANTAS are now my preferred airline.
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  • Fly81

    Fly81

    7 Jul, 2017 05:59 pm

    Fair and level playing field...clearly he has not read the Qantas sales act...the request to the government was for a change to the act or a guarantee on debt, not a direct cash hand out...pretty weak sledge...but all is fair in love and war...
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  • AnthonyvB

    AnthonyvB

    7 Jul, 2017 06:24 pm

    good point - and also didn't it have something to do with foreign investment? 
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  • Jonathan Ventham

    jventham

    7 Jul, 2017 07:30 pm

    golden rule for me, for many years - when flying o/s, fly with the national airline of that country. examples: Taiwan = EVA Air. Indo/Bali = Garuda. Thailand - Thai Airways. UK = BA (partners with SQ) USA = hmm unsure there these days. perhaps JAL or Hawaiian. I avoid QF and VA wherever possible
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  • Cameron Hocking

    blingwad

    7 Jul, 2017 09:53 pm

    Doesn't seem like a good rule. I think you made this up. 
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  • Jonathan Ventham

    jventham

    7 Jul, 2017 09:59 pm

    hey 'blingwad'. well, I guess you're entitled to your opinion. try the experience. you may change your mind. I've been flying regularly since 1972. I used to work for QF, back in the day. boom
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  • Matt Stevenson

    Madhatter49

    7 Jul, 2017 08:39 pm

    Talk about cheap.
    They're really trying to crack the market.


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  • Matt Stevenson

    Madhatter49

    7 Jul, 2017 08:40 pm

    https://www.ozbargain.com.au/node/317393

     
    Posting it a second time.
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  • GBRGB

    GBRGB

    7 Jul, 2017 10:48 pm

    I have a lot of criticism of QF but VA aren't exactly offering a great alternative, their domestic offering is limited and virtually follows the QF timetable anyway, they don't open new routes and services very often to create new opportunities, it's really just a me too business picking off the major routes.
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  • bert

    bert

    8 Jul, 2017 11:13 am

    The price war ending 2 or 3 years ago, qantas increased profits, virgin continues to make losses. Virgin product has gone backwards. Easy to blame someone else for their own management mistakes.
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  • Craig

    crwilkins

    8 Jul, 2017 11:49 am

    How many times have we heard "VA is about to start turning profits".....we are still waiting, the offering is continually confusing, nothing is seamless and it seems by all the changes they don't have the trust in their strategy, sorry Richard but in this war, Alan Joyce has in the end beaten your man to a pulp, results speak for themselves and they've both been at it the same amount of time
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  • Travelator

    travelator

    8 Jul, 2017 06:19 pm

    Virgin sold everything to fund their makeover. They were left with nothing to weather any storm in future. It happened with Mr Branson's blessing. I hope he's just as enthusiastic with his cheque book if Virgin ever struggles to pay the bills.
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  • CQ

    MEL Traveller

    9 Jul, 2017 10:20 am

    If they're considering new routes to Asia then I suggest MEL-BKK. Currently only Thai Airways (with variable hard product) and JetStar. Business travellers are flying SQ via Singapore or QF via Sydney. 
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  • Scott Brown

    DownSouth

    9 Jul, 2017 08:08 pm

    Without Virgin enjoy $1500 one way trips to Perth in Y and one FF seat availability per city pair per day on the day your not interested in traveling, they are the facts. All that's on offer in the last 6 years is because Virgin are a competitor. Look up a route QF have a monopoly on and see if those fares look enticing to you, if not give the little guy a go.
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  • Scott Bennett

    Bennett_s

    9 Jul, 2017 10:05 pm

    1. The facts? Facts usually have evidence to back them up. I'm sure you'll be able to provide precedence of $1500 one way fares to Perth in Y? 

    We get it. Competition is healthy but exaggerating and calling it a 'fact' doesn't help your cause. 
    2. I wouldn't consider Virgin 'A little guy'. Jetgo. Yes. REX. Yes. Skytrans Yes. Virgin definitely not. 
    3. What does your post have to do with the article? Richard Branson chose to publically give it to QF. No one argued that competition is a bad thing or that VA shouldn't exist. Some of us argued Branson was in poor form with the comments he made. Making VA out to be some kind of victim. 
    I hope VA can become a decent competitor but I have no sympathy for the situation they've found themselves in. 
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  • Kayla

    Kayla

    10 Jul, 2017 03:58 pm

    I've always seen Virgin as a competitor to Qantas and usually split my domestic travel between both. 

    However, given that Virgin told me that it was "my fault" I was stranded in Sydney due to a runway shutting down and offering no assistance or compensation, I've yet to be convinced to travel on them again. 

    Qantas have had their moments but on a whole I've had more positive interactions with them then negative. 

    Virgin I seemed to rack up more negatives then positives and as a result, I fly OneWorld now :)
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  • Markspark

    Markspark

    10 Jul, 2017 04:02 pm

    Hilarious Virgin tactic to blame someone else for their terrible strategy.  Also hypocritical for them to comment on QF asking for money from the Government when the only reason they aren't bankrupt is because of their cash injections by foreign carriers. Qantas doesn't have that option!  Anyway just a silly move by Branson to shine a light on their superior competitor. 
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  • Tanya Harris

    TanyaMEHarris

    10 Jul, 2017 05:00 pm

    If you travel to Europe, Virgin and way more expensive than Qantas
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  • crosscourt

    crosscourt

    10 Jul, 2017 05:27 pm

    Branson has always been a "poor me/us" person, when/if he talks about competition. They couldn't sustain Virgin Atlantic flying all the way to Australia via HKG.
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  • highflyer

    highflyer

    11 Jul, 2017 12:55 am

    Im fairly sure Virgin started the capacity war too out of spite and found out they started a war they couldn't win...
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  • traveller90

    traveller90

    11 Jul, 2017 09:36 am

    History has shown Virgin will always be the underdog to Qantas, but Qantas needs the competition to stay straight. Virgin does need to re-brand - just look at the overseas Virgin branded airlines - all seen as discount carriers. Virgin America was recently sold to Alaskan, which shows its position. Virgin needs to not only rebrand, but to also mature its product and show professionalism and only then they will start to fly! 
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17 Jul, 2019 05:06 am

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