Virgin Australia Ends Hong Kong Services And Chinese Expansion Aspirations

Virgin Australia is ending all services to Hong Kong. The airline made the announcement today, Thursday 6 February 2020. It brings to an end the airline’s attempt to break into the competitive market between Australia and Hong Kong.

Virgin Australia announced today it was finishing up with its Hong Kong service. Photo: Virgin Australia.

Services from Sydney and Melbourne to end

The airline had previously announced the ‘suspension’ of services between Melbourne and Hong Kong, with the last flights taking off on 11 February 2020. Virgin Australia said today that the route would be permanently shuttered.

In addition, the airline will permanently stop flying between Sydney and Hong Kong effective 2 March 2020. In a statement, Virgin Australia Group Chief Commercial Officer, John MacLeod said;

“Hong Kong has continued to be a challenging market. With a decline in demand following ongoing civil unrest and growing concerns over the coronavirus outbreak in the wider region, we have made the decision to withdraw services.

“While the decision to withdraw from the Hong Kong market has been a difficult one, it demonstrates our strong focus on driving greater financial discipline through our network.

“Current circumstances demonstrate that Hong Kong is no longer a commercially viable route for Virgin Australia to continue operating.”

It also brings to a premature end the joint venture between Virgin Atlantic and Virgin Australia that was only given the green light in September 2019.

An inglorious end to lofty ambitions in China

It is an inglorious end for what was supposed to be the launching pad for expansion into China.

The first flights between Melbourne and Hong were only launched in July 2017, soon to be followed by flights between Sydney and Hong Kong. At the time, Virgin Australia’s then CEO, John Borghetti said;

“Today’s inaugural flight marks the start of Virgin Australia’s expansion into Greater China.

“Hong Kong and mainland China are two of the largest and most valuable inbound travel markets for Australia and we are excited to introduce Virgin Australia to these regions. We believe there is a tremendous opportunity for growth in these markets.”

Happier times, launching the flights between Melbourne and Hong Kong in 2017. Photo: Virgin Australia.

Average loads on a competitive route

While the market between Hong Kong and Australia is a competitive one, dominated by Cathay Pacific and Qantas, Virgin Australia had a pretty good product and was a favorite with many travelers doing the 10-hour commute.

Average monthly load factors on the two routes between start-up and the outbreak of unrest in Hong Kong generally hovered around 60%. Virgin Australia’s strategic partner, feeding traffic to and from Hong Kong, was Hong Kong Airlines. Both airlines have a common shareholder in HNA, but Hong Kong Airlines ultimately turned out to be a poor choice of partner for Virgin Australia.

A changing of the guard at Virgin Australia

In 2019, there was a changing of the guard at Virgin Australia. The new CEO, Paul Scurrah, came in with a reputation for hard-headedness. He immediately set about with a comprehensive review of the airline, saying nothing was off the table.

Virgin Australia’s tough new CEO Paul Scurrah. Photo: Virgin Newsroom.

Several routes were to go, among them the Melbourne to Hong Kong route. The route out of Sydney was the stronger performer and temporarily held on. But the ongoing protests and now the coronavirus outbreak have dealt the death blow to the airline’s China aspirations and provide it with an easy exit from a difficult market.

Another terminated route to add to the list

It is also another terminated destination on a list of terminated services for Virgin Australia.

Long haul services to Johannesburg and Phuket did not survive long and an outlier service to Abu Dhabi ceased in 2017. That last service was run in conjunction with Etihad, a shareholder in Virgin Australia and fellow traveler in the virtual international network concept.

The withdrawal from Hong Kong leaves services between Australia and Los Angeles and soon to start services between Australia and Japan as Virgin Australia’s key international routes. The airline also flies to Indonesia, New Zealand and around the South Pacific.

On the plus side, it frees up an A330 in Virgin Australia’s notoriously stretched wide-bodied fleet. Regular passengers jetting between Australia’s east and west coasts will be hoping it will be used to bolster wide-bodied services on those routes.