OZFLYER86

Just been reported that some intrastate Virgin flights in Queensland at end of school holidays have been operating with low factors as low as 20%. For example, 30 people on a Boeing 737-800 on Brisbane to Cairns route, which is something like a 17% load factor.

This at a time when many hotels have occupancy rates of less than 20% & rental car companies have nowhere to park all the un-rented cars.

What’s going on ?

Are the people who manage yields asleep ?

Surely if someone got out there & said, rather than a general sale, maybe specific dates, specific hotels, you can get a great deal on this …

Return airfare, stating dates & times

Hotel stay for certain number of nights

Car for same number of days that suits the flights



Surely, instead of wasting hundreds of millions on welfare, govts should be promoting such deals.


Catch is, if done privately, advertising such deals is expensive and much travel advertising is not date specific, but rather a date range might be given.

How many times have you seen a airfare sale & the cheap seats are at 5am or 11pm.

Specifics work. If you know there are so many seats on this day & time & not other times, you might look.

Airlines, hotels, car rental companies could have a simple one page on their websites, stating what the deals are.

If they don’t want to show the individual prices of each, , then a package price can be given with no breakdown of costs.Also heard that some transfer companies, who are able to adjust vehicle size to demand, are however, sometimes transporting 1 person on an hour long transfers, which obviously isn’t viable.

Perhaps, transfer companies need to work together & offer pricing that reflects closer to cost, as heard that some people drive rental cars, which are very cheap currently, as cheaper than transfers. Maybe rather than a per person cost, think about pricing per vehicle, so if they can go somewhere towards filling vehicle the pricing is cheaper per person, such a $x for 1 person & 3 x $x for 5 persons.

In China, domestic flights are apparently back to pre corona levels, but airlines are not making any money, as told to fill aircraft, (ie. Get things back to normal ASAP) rather than go after profits.

CPMaverick

There is such a thing as pricing that is too low. Prices are low now. Would lower prices create more demand? Maybe, but they might lose money on those bookings.

OZFLYER86

this is where packaging works well.

So the hotel, car, flight must be all discounted, but no one buying the package knows which or how much. The package wholesaler might say, some component is free, even thought it's not.

Straight after SEP11, you could buy a hotel room on gold cost in a 4 star tower for $20/night as long as you bought 1000 nights & didn't disclose the cost paid in the package.

Hotel would then make something on all the extras.

Plus if a flight is empty (17% load would feel empty) then public & media start saying oh, they can't be doing very well, but if flight full, they say must be doing well, even when they have no idea of yields.

These flights were at end of school holidays when flights should be full.

CPMaverick

"We lose money on every sale, but make it up in volume."

OZFLYER86

The Qld govt has invested $200 million to keep virgin HQ in Qld. At the same time, virgin has flights with terrible load factors right at end of school holidays. Terrible PR if a reporter picked up on that.

Mwenenzi

Corrected your post
The Qld govt has given $200 million to keep Virgin HQ in Qld.
The way these buy outs work is the buyer get cash out as fast as possible. The Bain money men/women will be 100 times smarter than the QLD government bureaucrats & 1000 times smarter than the QLD pollies.

Very surprised the OP does not offered his/her airline management skills to Bain/VA2.0.

OZFLYER86

well someone at virgin wasn't doing their job.

17% load factors at end of school holidays should never ever happen. Should always be as close as possible to 100%.

Actually have done plenty of yield management & made a lot of money out of it, which means no longer have to work.


On one BNE/CNS flight virgin should have earned another AUD$10k alone. Multiply this by a number of flights & it adds up.

At same time former Virgin Mark 1 employees, are concerned they will be getting paid less, working for Virgin Mark 2 or Rex.

CPMaverick

🤣🤣🤣🤣🤣🤣 I'm sure the loads were there Virgin just forgot to pick them up

I'll give you this, you make a slow forum more entertaining...

Mwenenzi

Low load factor for VA aircraft = low load factor for VA forum.
Can't see much improvement in loads until state borders 100% open and unrestricted travel. Also a true 2 way AU<---->NZ travel bubble would also help. (AKL is closer to SYD/MEL than PER)
So low possibility in 2020 calendar year of increased factors

OZFLYER86

was in cairns last week. Very depressed even during school holidays.

There are no travel restrictions in state of Queensland & from northern New South Wales to Qld & there are nonstop flights from both Brisbane & Gold Coast.

Not sure of the exact population within an hours drive of these airports ut must be 4 or 5 million.

Saw the following on another forum, about how holiday packages work, which seems to make sense & implies that someone at virgin not doing their job.

Presume this type of thing would only apply in low season I guess, but same idea applies, if can't fill seat through normal methods.

Only thing can see that's not mentioned is cash flow, which is critical to every business.

Reminds me of the old saying ...

this business would be fantastic, if it wasn't for those annoying customers.

Without seat sales, what is an airline ?

>>>

Say normal average fare in school holidays is $150 each way BNE/CNS

Say a 5 star hotel in CNS averages around $200/night

Say a rental car company averages $50/day/small car

Say a reef cruise averages $150/person.

So with lots of empty airlines seats …

Airline gets $75 each way

Hotel gets $100/night

Car co. gets $25/day

& reef operator gets $75/person.

So a 3 night holiday package for 2, total net cost could be


Air $150/person = $300

Hotel $300/room for 3 nights

Car $75 for 3 days

Reef trip $75/person = $150



Total net cost for 2 = $825 or $412.50/person


The package is sold for $499/person & there’s $173 profit to be distributed between wholesaler who pays agent $99.80. Most wholesalers, also deal direct with public so they can pick up full profit.

As most agents have very extensive email lists, there is almost zero advertising costs, in fact, the newspapers/tv might pick up story about insanely low cost 5 star holidays.

What’s in it for everyone

1. Airline gets pax, who see flight is near full & sells drinks/food etc. at good margin + baggage (maybe offer only limited baggage)
2. Hotel makes money on drinks, food, room service, spa treatments etc. all at high margin
3. Car rental co. gets some revenue to cover fixed costs, like car holding costs, rego etc. & might be able to upgrade to bigger car & the real profit centre of car rental companies, the insurance often upgraded
4. Reef operator gets bums in seats, plus opportunity to sell drinks, snacks etc.

Most people don't consider extras like eating/drinking part of their holiday costs, as they would eat & drink if they stayed home.

Others in CNS region benefit from spending on anything from restaurants, bars, souvenirs etc.

Everyone wins.

There's in no breakdown of costs to pax or agents. Only the wholesaler knows what's being paid for each item.

When you consider that many business types who fly SYD/MEL or BNE/SYD for a day trip pay $500 to $1000 just in airfare, this sound very cheap, especially when flight is twice as long.

Also the upsell is to have additional nights at hotel or upgrade the car as part of package, rather than at car pick up.

The hotel could include breakfast for an additional price or dinner without drinks at some perceived lower price & then make money on the drinks.

So profits on these pax might be low, but better than letting these highly perishable items go unused & so causing a loss.

Pax have a good time, might go back again & again.

>>>

someone commented that $75 wasn't enough for airline, but other lcc airlines have regular $79 & $89 fares.

Mwenenzi

Very surprised the OP does not offered his/her airline management skills to Bain/VA2.0 and package tour operators.

OZFLYER86

well they certainly need someone who knows what they're doing. A business degree obviously doesn't cut it.

Any airline who can't fill seats in school holidays, won't be around too long. It's not rocket science.

rule 1
fill the aircraft

rule 2
once you've filled the aircraft, raise fares/add extra flights depending on competition is doing

Bain needs to get their act together fast.

Any package holidays seats usually come with lots of restrictions, to stop business types using them. They could be like the new discount coach seats in USA, ie no changes or refunds whatsoever & minimal or no checked luggage. How much luggage do you need for 3 nights in the tropics anyway ? & miss flight, lose fare, no discussion will be entered into.

Many years ago, airlines used to offer mystery flights. You'd pay a fare, then day before flight, airline would tell you where you were going. Could easily be tied in with a near empty hotel of certain standard.

Also, there used to be NAME YOUR FARE on www.priceline.com which is huge in USA & other sites.

A blind auction, that obviously would be set to take a minimum price, with or without human intervention. You didn't even know the airline. Had a few conditions from memory like ......

A to B could include 1 stop of no more than 3 hours & on same airline whole way. Flights would depart & arrive between 5am & 11pm.

So no price advertised, so no price dilution & price may change.

Eg. on the VA flight BNE/CNS the 1st few bidders, might have been successful at $50. Then they told their friends, who weren't successful at $50, but got them for $60, then $70, $80

or even buy 1 for $70, buy 2 for $135, buy 3 for $190, but 4 for $240 etc.

Also, lots of contra deals done in travel industry. Heard of one, that was airfares in exchange for booze. So the airline only served a certain brand of beer (at least for a while)

lokijuh

Hmmm, I guess you can ask when did Bain get the keys to the car airplane? Businesses don't turn on a dime. Bain obviously bought VA with something in mind. These sort of decisions don't get made in haste, I'd say unless you needed the cash to keep the company afloat you don't just do sporadic random things like suddenly offering holiday packages with a couple of weeks notice, at a period where uncertainty is high and demand is depressed. In the context of Bain's overall investment, a few empty flights between BNE and CNS is insignificant. Bain really needs the borders to be opened up for their investment to work and MEL/SYD, SYD/BNE AND BNE/MEL to be operating again.

JClasstraveller

And what were QF’s load factors?

OZFLYER86

virgin has or should have been doing packages with wholesalers all along, but strangely some australian wholesalers don't & have never sold them, but they do sell qantas & other airlines.

It was end of school holidays, when all airlines are generally full & who knows how many flights were like this.

Not sure about qantas loads but most jetstar flights BNE/CNS last few days of school holidays were apparently full or close to it.

... is going on ? Bain should be right on top of this. Someone dropped the ball.