Responding quickly to the Virgin results, I was most alarmed by Borghetti's comments. It wasn't so much what he said, but how he said it with a positive spin, a salesman's smile, and an everything will be great demeanour. To me it really seemed as though he didn't understand the depths of the issues facing the company. It's probably a facade but that is still a concern in itself as he isn't been honest with the market.

He went to great lengths to say that the company's underlying performance had improved, and that the bigger loss was due to one time costs. Having one time costs is understandable, but the fact that the company is still making an underlying loss is a real concern even if it is slightly better than last year. Fuel dipped below $30/barrel in the last quarter, the capacity war is long since over and capacity from all operators was flat, and Qantas is on track to deliver a thumping profit. VA should not be making an underlying loss in this environment. If they can't make money in a time of low fuel prices and capacity discipline then they will probably never be profitable.

Quoting RyanairGuru (Reply 1): It's probably a facade but that is still a concern in itself as he isn't been honest with the market

You could almost say it was exactly the same sort of view he held when he was leading QA, ie at the time when there were 4 744s bleeding cash to London and back. Its like there is a 'build it and they will come' mentality, but they don't ever come.

Quoting Airvan00 (Reply 6):

That is quite a valid reason for a flight to make an adjustment to its path. Looking through flightaware though, it seems to be a path though that they fly every day.

Managing the ongoing slots and flight times etc would be a follow on problem and not something that should limit a flight route though to reduce the cost of flying the route.

Quoting travelhound (Reply 16): I'd suggest the QANTAS grounding was such a large disrupt-er

QF disrupted itself, you are saying?!

Quoting allrite (Reply 5): If I understand correctly, VA bet big on the resources market. Their later acquisitions and routes have been structured around servicing the mines and miners

I agree that the slowdown in the resources sector is going to impact their earnings, but IMHO it is nothing more than a convenient excuse to explain their underlying loss. Writing down assets, such as the three ATR-72s, on a one-time basis is what it is, but the fact that Virgin isn't breaking even flying planes around is still a cause for concern.

As you said, Qantas was also very exposed to their resources sector, having acquired Network so they could play a larger role in the RPT market and they also had a plethora of Qantas-branded scheduled services to places in Queensland and Western Australia that I can barely pronounce, let alone find on a map.

While Qantas do of course have a much broader network to move assets around, I think that at the most fundamental level the reason that Qantas are doing much better right now is that they are enjoying higher yields on their core network between the capital cities. And this is why I find Borghetti blaming the resources sector disingenuous, it is a side show to deflect attention from the inherent weakness of Virgin's core network. They are loosing passengers on the bottom end to JQ but not poaching enough, or at least not at high enough yield, on the top end. These issues are intrinsic to Virgin Australia's model. He can trot out as many different excuses as he likes, but without addressing their yield disadvantage on the core capital cities routes they are never going to address their underlying revenue problem.

Quoting DeltaB717 (Reply 9): the consistency of product, both hard and soft, has never been there and that lack of consistency at VA keeps QF as the more attractive proposition for the higher yielding business travellers and frequent flyers

I think that part of the problem is that Virgin got stuck half way to becoming "premium". Their lounges, while generally "fresher" than the QantasClubs, have inferior products and services. The coffee is better, that's it. For example Qantas have much more plentiful food choices including hot options. Virgin now include catering on all fares, but give you a cookie while Qantas is serving hot meals. They offer "happy hour" drinks, but you better hope that you're not on a 19:05 flight otherwise that beer will set you back $8. IMHO the fundamentals are sort off there, but they are still slightly tinged by an LCC mindset.

I think that this goes back to them trying to please everyone, not wanting to alienate more of the market to JQ with the higher fares than a proper full service model would necessitate while trying to provide a high cost full service model, and ultimately therefore pleasing nobody.

Quoting allrite (Reply 3): While we pitch our new business class at halfway between business and first, premium economy will be halfway between economy and business but certainly closer to business class

I had to laugh at this. Their business class product is pretty decent, but their premium economy is the weakest in the region. Both Air New Zealand and Qantas run rings around them in premium economy IMHO.

On the VA strategy - if they were trying to make QF type 2, what is their competitive point of difference that would lead to pax choosing them instead of QF in the first place?