Evaluating Virgin Australia: Business Strategies and Sustainability

This report provides a comprehensive business analysis of Virgin Australia, focusing on its strategies, financial performance, and competitive advantages. It evaluates the company's management structure, service features, corporate governance, and regulatory environment. The report includes a SWOT analysis identifying strengths, weaknesses, opportunities, and threats, alongside an examination of financial performance over five years. Key strategic elements such as online ordering systems, bio-fuel practices, and alliances with other airlines are discussed. The report concludes with recommendations for improving Virgin Australia's sustainability and profitability, emphasizing the need to re-evaluate strategic partnerships and maximize profits from cargo and passenger services. Desklib offers access to similar solved assignments and reports for students.

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Business Analysis: The Case of Virgin Australia
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Company Analysis: the Case of Virgin Australia
Executive Summary
The sustainability of a given business is basically determined by strategies which it employs. The
focus of this report is to assess the strategies employed by Virgin Australia and relate them to its
current performance. The author also presents recommendations on how the company’s
strategies can be enhanced to improve the current and future performance.
Accordingly, the strategic analysis points out that Virgin Australia has in place an effective
management and leadership structure and has managed to exploit the available opportunities for
business sustainability and improvement. Nonetheless, despite this, the firm’s profits have
significantly declined over the recent past and this has been a cause for concern for the
shareholders. This is despite the fact that there are immense opportunities in the airline industry
which Virgin can exploit to improve itself. Additionally, while Virgin Australia has continued to
rely on its conventional core values of fun, innovation, and value, the company needs to
reconsider a new crop of customers, leisure travelers and aspects of gender in its business. The
firm’s sexist promotion has received a commensurable number of criticisms from the
stakeholders and the public at large. Furthermore, in order to expand seamlessly to other regions,
VA need to establish partnership with other air companies to funnel its purchases. Despite going
through a turbulent moment, the Australian airline industry offers a positive indicator for growth.
Therefore, better strategies need to be deployed in maximizing profits from fare and cargo.
Virgin Australia Ltd is an innovative entity which is also aggressive in marketing novel ideas.
This company has a vibrant online ordering and purchase system while also incorporating bio-

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fuel testing approaches. Other measures undertaken by the airline include leisure coupling in its
business systems, and the use of tiger strategy and grounding. These have helped the business to
appeal to more customers from both the high and low end. This generates a potential for the firm
in drawing more investors as well as capital for the business.

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Table of Contents
1.0 Introduction................................................................................................................................5
1.1 Management Structure...............................................................................................................5
2.0 Service Features........................................................................................................................6
3.0 Corporate Governance ..............................................................................................................6
4.0 Regulatory Environment............................................................................................................7
5.0 Financial Performance...............................................................................................................7
6.0 Competitive Advantage.............................................................................................................9
Part B: Organizational analysis:......................................................................................................9
1.1 SWOT Evaluation......................................................................................................................9
2.0 Financial Performance and Management................................................................................11
3.0 Conclusion...............................................................................................................................13
Reference List................................................................................................................................14

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1.0 Introduction
Virgin Australia Airlines Pty Ltd is the 2nd largest airline in Australia. However, by fleet size, it
is the largest in the country. The company’s headquarter is in Bowen Hills, Brisbane. The firm is
co-owned by Brett Godfrey and Richard Branson, both of whom are renowned British
Businessmen. Virgin Australia was established towards the end of 1999 with its key assets being
only aircrafts which operated in only one route. However from that time, the firm has grown
tremendously in size and in fleet to become the second airline in Australia in the current
perspective. It now serves over 30 Australian towns from its Brisbane hub using the Boeng and
Embraer jets (Australian Securities and Investment, 2017).
1.1 Management Structure
Figure 1.1 presents the management structure for Virgin Australia (Appendix 1)

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The board offers strategic guidelines on the company and overseeing the overall performance of
the management. It also undertakes regular assessments of the organizational performance in
general. They are also mandated to evaluate the directors operations as well as facilitating
external performance appraisals. On the current level, the board consists of four committees,
each of which is headed by a director. The respective committees include: The Nominated
Committee, Operational Risk Review Committee, The Remuneration Committee, and the Audit
and Risk Committee. All of these committees have a board approved document charter which
guides their operations.
2.0 Product and Service Features

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Virgin Australia interacts with its customers in a peculiar way and thus considers the aspect of
relationship management on a serious note. Accordingly, the firm trains its human resources on
how to handle clients and address their concerns. For VA, high quality is important for service
and customer management. In further improving its quality and service delivery, VA launched a
loyalty program for the sole purpose of enticing its clients who use their services. This program
was quite effective in luring potential and existing customers to continue using the services
(Virgin Australia, 2017).
3.0 Corporate Governance
Virgin Australia has a commitment of positioning the company for the long-term. The company
strives to operative in a responsible manner by employing strategies and practices which are
holistic for the purpose of managing the company’s social, environment, economic opportunities
and risks. Moreover, the company has a commitment of making its operation and activities
sustainable in the industry of its operation. These objectives are duly outlined in the official
company sustainability policy (Virgin Australia Airlines Pty Ltd, 2017).
4.0 Regulatory Environment
The regulations for the airline industry in Australia are not so stringent. However, these
regulations become extensive at the Commonwealth level. Nonetheless, the Australian
government is fully committed in liberalizing the air travel industry. This objective was initiated
in 1999 after a Productivity Commission found that there was a need for an economic framework
to effectively support the growth and development of the local airline industry (Webb and Kain,
2003).

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5.0 Financial Performance
Figure 1.2 below presents a consolidated 5 year performance for Virgin Airline Australia
Figure 1.2: Virgin Australia’s Financial Performance
Over the Last Five Years
Income Statements in Australian
Dollars
2013 2014 2015 2016 2017
REVENUE 4b 4.2b 4.3b 4.9b 5
Gross
Margin
48.10%
-Net Profit
Margin
-4.68%
-Operating
Margin
-3.46%
NET
INCOME
40 -50 60 -235 -212
Return on
assets -4
Return on
equity -18.77%
Return on
investment -5.11%
CASH
FLOW IN
AUD -0.5
300 265 90 250
Cash -0.5b 0.7b 1.1b 1.2b 1.3b
Cash flow
per share 0.0158
0.1854
0.1124
BALANCE
SHEET IN
AUD
total assets 1.8b 1.8b 2.4b 2.5b
current ratio 0.7612
book value
per share 0.7415
Tangible
book value 1.8b 1.9b 2.4b 2.5b

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total
debt/equity 1.55
Total
debt/capital 0.6073
VA had a consistent flat profit of 5.00bn for the five year period. However, the firm’s net income
grew from a loss of 260.95m to 222.30m. A reduction in the cost of goods is regarded to be one
of the key factors that contributed to the increase in profits as a sales percentage. In 2017, the
overall cash reserves for VA grew by 275.30m. The overall cash flow of this entity reached a
pick of 338.20m for its general revenue. Additionally, it was able to gain over 280.90m in cash
from its operations while its investment and expenditure reached a pick of 330.60 million.
Nonetheless, on the current stance, Virgin Australia is grappling with a debt ratio of 60.73%
which is slightly lower than what was realized in the previous year (Financial Times, 2017).
Owing to the consisted loss, the company’s sustainability is in jeopardy. This therefore creates a
need for the management to employ that can make the business sustainable.
6.0 Competitive Advantage
The competitive advantage of this firm is majorly derived from its innovativeness.
Furthermore, this company is quite aggressive in marketing new ideas. For example, the
firm has a fully operational online working system and it strictly adheres to bio-fuel
practices. The company is also among those that have incorporated coupling of business
leisure.
Part B: Company analysis:

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In this section, we will conduct an analysis of Virgin Australia using the SWOT Analysis. A
SWOT Analysis refer to a strategic planning instrument that aids business managers in
identifying their own weaknesses or strengths alongside the threats and opportunities that may be
extant in a given business context. In most cases, a SWOT analysis is utilized in business
strategizing as well as in team discussions (Gregory, 2017, para.3).
1.1 SWOT Analysis
Table 1.1 SWOTS FOR VIRGIN AUTRALIA
STRENGHTS
.Experienced talent
.Low costs of operations
.Government support
WEAKNESSES
High debts
High competition in the
industry
Low investment in
research
OPPORTUNITES
High growth potential
Positive economy
High-demand
New services and
products
THREATS
High competition
Low cash flow
Issues relating to
sustainability
Limited financial capital

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Analysis of the Business Sustainability and Viability for Virgin Australia
The company’s competitive strategies include online ordering systems, bookings, upgrades and
bio-fuel testing. The firm’s environmental sustainability operations have enabled it to avoid the
costly carbon tax introduced by the government for air polluters. The policy of environmental
friendliness has casted a positive social stance among the populace, clients, and the government.
The company is in a marketable position which supports the value of fun and affordability.
Accordingly, it has a unique market base which consists upscale and business travelers (Davis,
2013).
However, the organization’s profit has been gradually declining over the recent past amidst
escalating level of debts. Consequently, the firm’s prices and stock rate have been consistently
declining. It should also be noted that the company’s aircrafts are not suitable to all forms of
flight. This is the reason it uses general planes for loading and unloading of cargo. Some of its
partners including SkyWest do not have much recognition in the country and hence; have fewer
customer bases. SkyWest for instance is usually ranked low on market survey for preferred
airlines. Therefore, such companies have no much value to the VA.
Prices for its stock have recently risen from low fortunes as a result of financial downturns.
Additionally, the tiger grounding strategy has greatly been of help to the company inform of
attracting customers from different sites, weather from the low end to high end. This has enabled
the firm to attract more investors thus raising the capital.

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Virgin Australia’s alliance with Qantas and Singapore Airlines has improved its revenue
opportunities. The firm has also partnered with Tiger Air. This may enable VA to topple Jetsar
and Qantas. Through Qantas, VA will be able to explore the routes and schedule enjoyed by the
firm. Furthermore, an alliance with SkyWest creates a positive synergy with a potency to venture
into Perth. This will also make it possible for VA to benefit from the Western market for air travel
services (Chong, 2017).
The regular GFC challenges have adversely affected the Australian Airline industry. For
example, the entry of Singapore Airlines in the local Australian market has threatened the
market. One of the negative consequences for strategic partnerships between Virgin Air and
Tigerair was the cancelation of some of its internal routes because of the regulatory issues
involving some of the countries. Therefore, there is a possibility for some of the operations to be
abridged and the anticipated benefits not to be achieved from these partnerships.
3.0 Conclusion
This report for Virgin Australia’s strategic evaluation has noted that the company harbors an
effective management structure. Moreover, there are immense opportunities for this operator to
move to another level. Nonetheless, the significant level of debts coupled with a declining rate of
profits over the years is matter that should be looked at very keenly. The opportunities if well
explored will enable Virgin Australia to improve its competitive advantage. Moreover, the
exploitation of innovation to a more in-depth level can improve the fortunes of Virgin Australia.
The airline also needs to revaluate the viability of its strategic partners to point out those that add
value and those that have no value for the business. Those which are found not have value should
be discarded while those with value should be retained. Generally, despite hard times and