Virgin Australia has trimmed its longstanding Boeing 737 MAX order. Previously, the Brisbane-based airline had forty-eight 737 MAXs on order. Now, Virgin Australia will take just 25 Boeing 737 MAX 10s. The first MAXs were due to arrive next now. That is now pushed back to 2023.
“We have already moved to simplify our mainline fleet and committed to the Boeing 737 aircraft as the backbone of our future domestic and short-haul international operations,” said Virgin Australia CEO, Jayne Hrdlicka on Wednesday morning (Sydney time).
“The restructured agreement and changes to the delivery schedule of the Boeing 737 MAX 10 gives us the flexibility to continually review our future fleet requirements, particularly as we wait for international travel demand to return.”
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Virgin Australia’s MAX order gets trimmed, not axed
Virgin Australia was widely tipped to ax its MAX order. That order comprised 38 737 MAX 8s and 10 737 MAX 10s. The re-negotiated order, trimmed or not, may surprise many industry insiders. Even with deliveries not slated to begin before 2023, Virgin Australia will become the MAX aircraft’s first Australian operator.
2020 has proved a tumultuous year for the Australian airline. Already under financial pressure, the initial travel downturn earlier this year pushed Virgin Australia over a cliff, with the airline going into administration in April. Over the following months, insolvency experts restructured and sold Virgin Australia. It is only in the last month that the process has been finalized.
However, the new owners, United States private equity outfit, Bain Capital, are keeping a close eye on the bottom line. They reduced the fleet to around half its former size and decided to stick with a single aircraft type – the 737-800.
If Virgin Australia elected to do cancel its entire US$2.5 billion MAX order, Boeing could have kept the multi-million dollar deposit.
However, the MAX is getting back into the air again. The plane has recently been approved to fly by the Federal Aviation Administration and other regulators. Virgin Australia is making a play from left field and surprising a few people today.
“The MAX 10 will allow us to build on the operational flexibility we have been able to achieve with our existing fleet throughout administration to ensure we remain competitive on the other side of COVID-19,” says the Virgin Australia CEO.
737 MAX not the answer to Virgin Australia’s Japanese ambitions
While delivery of the first plan remains over two years off, incorporating the re-born MAX into the Virgin Australia fleet may allow the airline to compete better with local powerhouse Qantas.
At the moment, Virgin Australia says it plans to use the MAX on high-density short-haul and international routes. That’s code for the premium traffic-heavy golden triangle routes in Australia’s southeast corner and quick hops across the Tasman Sea to New Zealand. Bali might also be on the horizon.
But it won’t work on Virgin Australia’s still retained ambitions to fly to Japan. In recent days, the airline has asked the Australian Government to hold onto its (suspended) rights to fly between Australia and Japan.
The problem for Virgin Australia is that they no longer have planes capable of making the journey in a single hop. If Virgin Australia wants to return to Japan in the short to medium term, it means they’ll need to think outside the box, wet-leasing a plane from ANA, for example.
Virgin Australia says it remains in discussions with aircraft manufacturers on a fleet strategy to support widebody services reintroduction when long-haul international travel demand returns.
Delivery of the first Virgin Australia Boeing 737 MAX 10 is expected in mid-2023.