Strategic Management of Virgin Australia Airlines

This report analyses the background of Virgin Australia Airlines, identifies threats and opportunities, and discusses the need for innovation and growth strategies. It also includes a PESTEL analysis, BCG Matrix, and McKinsey GE analysis. The report evaluates an opportunity for the company and its innovation plan.

Running head: STRATEGIC MANAGEMENT OF VIRGIN AUSTRALIA AIRLINES
Strategic Management of Virgin Australia Airlines
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1STRATEGIC MANAGEMENT OF VIRGIN AUSTRALIA AIRLINES
Executive Summary
The primary purpose of this report is to discuss about Virgin Australia Airlines and analyse
the threats and opportunities pertaining to the company. It elaborates on the external forces of
the company and the need for innovation for Virgin Australia Airlines. It elaborates on the
BCG Matrix and Mckinsey GE analysis of Virgin Australia Airlines. It also expounds on the
strategies for growth along with the innovation plan of the company.

2STRATEGIC MANAGEMENT OF VIRGIN AUSTRALIA AIRLINES
Table of Contents
1.0 Introduction..........................................................................................................................3
2.0 Company Background..........................................................................................................3
3.0 Analysis of Virgin Australia Airlines..................................................................................4
3.1Threats and opportunity....................................................................................................4
4.0 Need Innovation...................................................................................................................4
5.0 PESTEL................................................................................................................................5
6.0 BCG matrix..........................................................................................................................6
7.0 Mckinsey GE analysis..........................................................................................................7
8.0 Strategies for growth............................................................................................................8
9.0 Evaluate one opportunity.....................................................................................................9
10.0 Evaluate your company innovation plan............................................................................9
11.0 Recommendation and Conclusion......................................................................................9
12.0 References........................................................................................................................11
13.0 Appendices:......................................................................................................................13

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1.0 Introduction
Innovation refers to the creation of a new idea or a method that can help in providing
a company with competitive advantage so that it can stay relevant in the current market. It is
indicative of applying of better solutions that can help in meeting the new requirements of the
present age consumer. The innovation can take place with the help of effective products,
services along with technologies and then they should be made available in the market. This
report throws light on the background of Virgin Australia Airlines and analyses the threats
and opportunities in relation to the company. It also discusses about the external forces with
the help of PESTEL, BCG Matrix and McKinsey GE analysis. It also elaborates on the
strategies for growth and the innovation plan pertaining to the company.
2.0 Company Background
Virgin Australia Airlines is the second largest airlines in Australia and it is the largest
airlines in terms of fleet size. It is based in Brisbane and the airline was founded by Richard
Branson who is a British businessman (Virginaustralia.com 2018). It was initially established
by the name of Virgin Blue I the year 1999. Initially there were two aircrafts that used to
operate on that of the single route but soon it got catapulted to the position of second largest
airline within Australia after the collapsing of Ansett Australia. The airline currently serves
29 cities within Australia from the different hubs of Brisbane, Melbourne along with Sydney.
Virgin Australia operates flights to Bangladesh, Belgium, Brunei, Canada, Denmark, Egypt,
Finland, France, United Kingdom, Uited States and Thailand. There are flights to different
cities like Abu Dhabi, Ahmedabad, Amsterdam, Athens, Auckland, Bahrain, Denver, Detroit,
Geneva, Hong Kong and Houston.

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3.0 Analysis of Virgin Australia Airlines
3.1Threats and opportunity
External environment can help in the identification of strategic opportunities along
with threats that can be beneficial for the organization in maintaining of its strategy. The
external environment is inclusive of the industry environment, national environment and that
of the macro environment. The government regulations in Australia along with fierce
competition prevailing within the airlines industry has forced the company of lowering its
cost (O’Connell 2016). It can help in the process of formulation of business strategies that
can help them in surviving. The threats of Virgin Australia is on account of the presence of
rival companies within Australia like Air Link, Airlines of Tasmania, Air North and Alliance
Airlines (Hill, Jones and Schilling 2014). The premium services offered at an affordable price
proves to be an opportunity for Virgin Australia Airlines. The opportunities have been
created owing to the fact that Virgin Australia Airlines has been able to re-position itself from
that of a budget airline to a diversified form of service. Virgin Australia Airlines has spent a
large amount of money for upgrading the fleet and the relationship of the Group with the
different unions has resulted to produce higher profit margin of Virgin Airlines Australia.
Virgin Australia offers high quality product that hs helped the company in earning a strong
strategic position.
4.0 Need Innovation
The innovation in the aviation sector is important as the consumers want a pleasant
travelling experience. The people travelling to their favourite holiday destinations or for
business purpose needs a comfortable experience that can stay entrenched in their mind.
Flying is undergoing changes at a fast pace and since the competition in between the airlines
is very intense hence it is important to bring forth innovations in Virgin Airlines Australia. It
can help the airlines in earning profits that can help them in staying ahead of their

5STRATEGIC MANAGEMENT OF VIRGIN AUSTRALIA AIRLINES
competitors. The innovations can help in broadening the scope for profit for the Airlines. The
innovations can help in taking the industry to the next level that can help it rising above their
competitors (Steinbach et al. 2017). Data should be contextualised and customer experience
should be personalised that can help Virgin Airlines Australia in staying ahead of other
competitors in the present industry. The data should be leveraged that can help in making the
airlines efficient. Innovation thus forms the core of the future strategy of the Virgin Australia
Airlines. The changes brought about in Virgin Australia Airlines can help in adding value to
the company and can help in opening up the market for the airlines.
5.0 PESTEL
Political: Airline industry is hugely affected by the political condition prevailing in a
country. The warm relations that Virgin Australia Airlines with different countries has helped
in the creation of open aviation market for the airlines company (Wheelen et al. 2017).
Economic: Liberal aviation policy pursued by the Australian government has helped Virgin
Airlines Australia in earning huge amount of profit. The decline in the pricing of oil have
helped in increasing the profitability in relation to the airlines.
Social: Virgin Australia Airlines is the second largest carrier within Australia and it has
helped the company in enjoying a huge amount of public trust along with support. The
domestic partnerships within Australia has helped in boosting the customer base of Virgin
Australia Airlines (Rothaermel 2015).
Technological: Investment in the arena of technology by the Australian government can help
in the company in earning huge amount of success. Wi-fi along with Stan streaming is
streamed in Virgin Australia Airlines that helps in providing an enriching experience to that
of the customers.

6STRATEGIC MANAGEMENT OF VIRGIN AUSTRALIA AIRLINES
Legal: The repealing of the carbon tax by the Australian government can help in relieving the
legal complications pertaining to Virgin Australia Airlines.
Environmental: The aviation sector in Australia lays emphasis on the aspect of sustainable
aviation fuel that can reduce the impact on the environment. Virgin Australia Airlines has
fuels that are derived from that of bio mass that ensures the long-term fuel security in relation
to the aviation sector.
Political Economic
 Warm relations of Australia with
other countries
 Liberal aviation policy
 Decline in pricing of oil
Social Technological
 Has public trust and support
 Domestic partnerships in Australia
 High amount of investment in the
field of technology
Legal Environmental
 Repealing of carbon tax  Emphasizing on sustainable aviation
fuel
6.0 BCG matrix
The flights sector of Virgin Australia has the capacity of generation of revenue on that
of long term basis on account of the fact that fare promise is provided by the Airlines. It
guarantees the customers of Virgin Australia Airlines that in the event of finding a lower
price on that of the third party website Virgin Australia will match that particular price. High
market share pertaining to Virgin Australia Airlines has earned it a distinct position in the
industry and Virgin Australia Airlines helps in ensuring the fact that it is able to earn stable

7STRATEGIC MANAGEMENT OF VIRGIN AUSTRALIA AIRLINES
earning for the Virgin Group. Virgin Australia Airlines can hence be termed as a cash cow
and it does not show any kind of negative impact on account of the slow industry
development (Meyer, Neck and Meeks 2017). High market share helps in adding to the
financial stability in relation to the firm. Virgin Australia Airlines makes significant
contributions to that of the financial strength of the Virgin Group. The mature level of the
airlines sector creates pressure so that it can maintain a profitable business but the cash cows
work in a better manner inspite of having a saturated industry. Increase in revenue earnings
for Virgin Australia Airlines is on account of the increasing number of the customers
pertaining to Virgin Australia Airlines. Virgin Group is making use of the airlines sector as
that of a cash flow that brings in high profit from Virgin Australia Airlines (Lasserre 2017). It
does not belong to the stars category as the market of Virgin Australia Airlines has already
expanded and created an exclusive position in the airlines industry. Virgin Australia Airlines
has been able to make a $ 4.4 million profit in the second half year of the year 2017 (see
Appendix A). The airlines was able to earn the highest amount of revenue within 10 years
and the profit before that of tax was around 142 % (Lieberman, Garcia‐Castro and
Balasubramanian 2017). They were able to earn a massive profit of around $ 102.5 million
(Lin 2015). Virgin Australia Airlines has thus been able to perform quite well and there is no
ambiguity in relation to the future prospect of Virgin Australia Airlines. It hence cannot be
termed as neither a question mark nor a dog within the BCG Matrix.
7.0 Mckinsey GE analysis
The Mc Kinsey 7s model of Virgin Australia Airlines can help in determining
whether the different elements pertaining to the organization are aligned with the objectives
of the organization. The strategy of Virgin Australia Airlines targets the reduction pertaining
to cost along with improved yields. Business class has been introduced in Tasman along with

8STRATEGIC MANAGEMENT OF VIRGIN AUSTRALIA AIRLINES
Pacific Island that has acted as an effective strategy for Virgin Australia Airlines. The
international seat capacity of Virgin Australia Airlines has also helped in earning it a distinct
place among the airlines industry (see Appendix B). Virgin Australia Holdings has proposed
a new structure pertaining to the business that can help it in complying with Air Navigation
Act. It can help in limiting the foreign ownership pertaining to Australian international
Airlines to that of 49 %. The cabin crew of Virgin Australia Airlines possess high amount of
hospitality skills that can help them in ensuring the on-board safety of the guests. The style of
working of the cabin crew is diverse and the employees of Virgin Australia Airlines are
resilient who can work under immense pressure (Pereira and Caetano 2015). There are
separate arrangements in Virgin Australia Airlines for those who have their vision or hearing
faculty impaired, for those having pets and for those who suffer from medical conditions.
Virgin Australia Airlines has now changed into the Sabre booking along with check-in-
system in its network of flights (Garcia‐Castro and Aguilera 2015). The flight bookings can
be done with the help of the website of Virgin Australia that has helped in upgrading the
system in relation to Virgin Australia Airlines. Virgin Australia Airlines wants to create a
difference and it stands for the principles pertaining to money, quality and innovation (Yan,
Cui and Gil 2016). This has helped the company in achieving competitive advantage and
realize their objective.
8.0 Strategies for growth
Diversifying the business so that it becomes less dependent on that of low-margin
commodity can prove to be the key for the success of Virgin Australia Airlines. The company
has to confront the competitors like Tiger along with Jetstar who have cut down the prices.
Virgin Australia Airlines has brought in different business friendly products that is inclusive
of business class seat for that of eastern sea-board flight. The service provided by Virgin
Australia Airlines is emerging to become more tailored (Johnston and Marshall 2016). It will

9STRATEGIC MANAGEMENT OF VIRGIN AUSTRALIA AIRLINES
aim at becoming more responsive along with flexible that can help in the creation of a strong
bond with the customers and the staff. Virgin Australia Airlines focuses on the aspect of
continuous improvement and unlocks different kind of thinking that can help in the creation
of value for the Australian airlines.
9.0 Evaluate one opportunity
An opportunity for Virgin Australia Airlines can be provided by the fact that it can
deepen the relationship with that of Singapore Airlines. It can help in filling the void on
account of the fact that cross- Tasman joint venture with that of Air New Zealand ends in the
year 2018 (Salter and Tether 2014). Virgin Australia can make use of Singapore Airlines so
that it can maintain presence within that of Melbourne- Wellington market. Virgin Australia
in the present stage does not operate in this route and it can launch Melbourne Wellington
that can help it in securing a distinct position within the Australian Airlines industry.
10.0 Evaluate your company innovation plan
The innovation plan of Virgin Australia Airlines focuses on the IFE system that can
allow the consumers of using their own device (phones and tablets). They want to change for
that of the better by focussing on the consumers. Virgin Australia Airlines wants to provide
heart felt service to their guests. The innovation strategy of Virgin Australia Airlines wants to
keep people at the centre of their service delivery (Sari, Rinawati and Midiawati 2018).
Content revolution is taking place at the global arena and superior technology can help in
providing a pleasant experience to the consumers of Virgin Australia Airlines.
11.0 Recommendation and Conclusion
The threats in relation to Virgin Australia is owing to the presence of the competitor
companies like Air Link and Air North. Premium services are provided by the Airlines at a
price that is affordable and this provides opportunity for Virgin Australia Airlines.

10STRATEGIC MANAGEMENT OF VIRGIN AUSTRALIA AIRLINES
Innovations can help Virgin Australia Airlines in earning more profit. This can help in taking
the airlines to that of the next level which can help the company in attaining competitive
advantage. Virgin Australia Airlines has warm relation with the various countries that has
successfully created open aviation market pertaining to the airlines company. Carbon tax has
been repealed that can help in the process of relieving of the legal complications in relation to
Virgin Australia Airlines. Virgin Australia Airlines can be called a cash cow and the firm is
financially stable that can help it in earning more amount of profit. International seat capacity
pertaining to Virgin Australia Airlines has helped it in acquiring a unique position within that
of airlines industry. The new structure of Virgin Australia Airlines enables it to comply with
that of Air Navigation Act that can help in attaining long term success for the company.
Recommendations
 Show the available seats of Virgin Australia Airlines on the seat map and the
accurate showing of seats can prove to be of great convenience for the passengers
 Allow the gate-to-gate of that of device usage

11STRATEGIC MANAGEMENT OF VIRGIN AUSTRALIA AIRLINES
12.0 References
Businessinsider.com.au (2018). Virgin Australia has returned to profit. [online] Business
Insider Australia. Available at: https://www.businessinsider.com.au/virgin-australia-has-
returned-to-profit-2018-2 [Accessed 14 Jun. 2018].
Centreforaviation.com (2018). Virgin Australia targets cost reduction, improved yields. A
group strategy presents opportunities. [online] CAPA - Centre for Aviation. Available at:
https://centreforaviation.com/analysis/reports/virgin-australia-targets-cost-reduction-
improved-yields-a-group-strategy-presents-opportunities-211115 [Accessed 14 Jun. 2018].
Garcia‐Castro, R. and Aguilera, R.V., 2015. Incremental value creation and appropriation in a
world with multiple stakeholders. Strategic Management Journal, 36(1), pp.137-147.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an
integrated approach. Cengage Learning.
Johnston, M.W. and Marshall, G.W., 2016. Sales force management: Leadership, innovation,
technology. Routledge.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
Lieberman, M.B., Garcia‐Castro, R. and Balasubramanian, N., 2017. Measuring value
creation and appropriation in firms: The VCA model. Strategic Management Journal, 38(6),
pp.1193-1211.
Lin, Y.H., 2015. Innovative brand experience's influence on brand equity and brand
satisfaction. Journal of Business Research, 68(11), pp.2254-2259.
Meyer, G.D., Neck, H.M. and Meeks, M.D., 2017. The entrepreneurship‐strategic
management interface. Strategic entrepreneurship: Creating a new mindset, pp.17-44.

12STRATEGIC MANAGEMENT OF VIRGIN AUSTRALIA AIRLINES
O’Connell, J.F., 2016. Airlines: an inherently turbulent industry. In Air Transport in the 21st
Century (pp. 109-146). Routledge.
Pereira, B.A. and Caetano, M., 2015. A conceptual business model framework applied to air
transport. Journal of Air Transport Management, 44, pp.70-76.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Salter, A. and Tether, B.S., 2014. Innovation in services: An overview. Managing services:
Challenges and innovation, pp.134-153.
Sari, D.P., Rinawati, D.I. and Midiawati, M., 2018. Airline Service Quality Analysis Using
Integration of FUZZYSERVQUAL, PGCV Index, and TRIZ Methods in Indonesian Full
Service Carrier Airlines. International Journal on Advanced Science, Engineering and
Information Technology, 8(3).
Steinbach, A.L., Holcomb, T.R., Holmes, R.M., Devers, C.E. and Cannella, A.A., 2017. Top
management team incentive heterogeneity, strategic investment behavior, and performance:
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1720.
Virginaustralia.com (2018) | Virgin Australia. [online] Virgin Australia. Available at:
https://www.virginaustralia.com/eu/en/ [Accessed 14 Jun. 2018].
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic
management and business policy. pearson.
Yan, W., Cui, Z. and Gil, M.J.Á., 2016. Assessing the impact of environmental innovation in
the airline industry: An empirical study of emerging market economies. Environmental
Innovation and Societal Transitions, 21, pp.80-94.

13STRATEGIC MANAGEMENT OF VIRGIN AUSTRALIA AIRLINES
13.0 Appendices:
Appendix A
Figure: Half Years Results in Numbers of Virgin Australia Airlines
Source: (Businessinsider.com.au 2018)

14STRATEGIC MANAGEMENT OF VIRGIN AUSTRALIA AIRLINES
Appendix B
Figure: International seat capacity of Virgin Australia Airlines
Source: (Centreforaviation.com 2018)