Virgin Atlantic Airways has announced it will close its daily link between Hong Kong and Sydney from May 5, 2014 ending its operations to Australia. The carrier launched flights on the route, an extension of an existing service between London Heathrow and Hong Kong, in December 2004 but says "increasing costs and a challenging economic environment" have meant the route is “no longer considered profitable".
“Despite the best efforts of our employees, external factors such as increasing costs and a weakening Australian dollar have affected our profitability. These are still difficult times for the airline industry and as part of our strategy to operate more efficiently; we need to deploy our aircraft to routes with the right level of demand to be financially viable.”
Craig Kreeger
Chief Executive Officer, Virgin Atlantic
Virgin Atlantic’s arrival in Australia was a long-time wish of its founder Sir Richard Branson and the closure of the route will be a personal blow to the entrepreneur. The route had been launched with a fanfare of publicity but this was not enough for the airline to succeed on the famous Kangaroo route.
“Despite the best efforts of our employees, external factors such as increasing costs and a weakening Australian dollar have affected our profitability” said Craig Kreeger, chief executive officer, Virgin Atlantic in a statement. “These are still difficult times for the airline industry and as part of our strategy to operate more efficiently; we need to deploy our aircraft to routes with the right level of demand to be financially viable.”
It is currently not clear if this decision is part of a wider group strategy that could see Virgin Australia launch its own flights from the likes of Sydney and Melbourne to Hong Kong using its Airbus A330s and feeding into the London flights of its sister carrier. The A330 would be better suited to the route pair than the larger four-engined A340-600 that is currently deployed on the London – Hong Kong – Sydney routing by Virgin Atlantic.
Our own analysis of MIDT data shows that the market between London and Sydney has changed dramatically over the past five years as the traditional market leaders have seen their own share of the demand decline significantly. The end of the relationship between British Airways and Qantas and the latter’s new partnership with Emirates Airline has seen the UAE hub carrier as the principal winner in this market with the multiple daily flights it and Qantas now offer.
Interestingly, Virgin Atlantic grew to its largest share of the O&D traffic between London and Sydney in 2012, up just below 50 per cent on the previous year and almost double its performance in 2011, but this was likely to have had an adverse reaction to yields. On a positive note, our data shows that Virgin Atlantic actually carried more O&D passengers between London and Sydney than British Airways last year, a personal milestone that will certainly offer Sir Richard Branson a small smile despite the decision to close the route.
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