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Virgin set to cut routes, update premium product

written by WOFA | June 3, 2010
VB's introduction of premium economy reportedly has been only marginally successful.
VB's introduction of premium economy reportedly has been only marginally successful.

Virgin Blue CEO John Borghetti has started a major review of the airline’s network and product as it aims to increase its share of the corporate travel market and lower its exposure to the leisure market.

According to a report in The Australian, the network review is expected to be completed by the end of June, and is expected to lead Virgin Blue to rationalise capacity on leisure markets, with V Australia’s services to Fiji and Phuket likely to be axed in favour of operating more services from Melbourne and Brisbane to the US. Pacific Blue’s domestic New Zealand services are also likely to be streamlined, with the airline suffering due to the strong competition with Jetstar and Air New Zealand in the small market.

Borghetti told analysts from Macquarie Equities Research that he was aiming to boost the airline’s share of the domestic corporate market from 10 to 15 per cent over the next year or two, adding that previous efforts such as the introduction of premium economy had only been marginally successful. Expanding the Velocity loyalty program is also understood to be a major priority, while a revamp of the airline’s premium economy product also appears to be favoured by Borghetti.

Virgin Blue recently issued a major profit downgrade for the current financial year recently, noting that it expects to record a net profit before tax of between $20-$40 million, down from its previous forecast of $80 million. The airline attributed the downgrade to deterioration in the leisure travel market and lower fares.


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