The Evolution of Virgin Australia from a Low-Cost Carrier to a Full-Service Airline – Implications for the Tourism Industry

Abstract

This chapter explores the evolution of Virgin Blue, a low-cost carrier that commenced operations in Australia in 2000, through a process that saw it emerge as a full-service airline by 2012. The path of evolution is analyzed with the aid of several strategic marketing concepts including strategic windows and repositioning. Given the contemporary nature of the area of study, the research employs historical narrative and case study methodology. From a tourism industry perspective, the discussion highlights the usefulness of the strategic management approach including the use of strategic windows and demonstrates that firms are able to successfully reinvent themselves to respond to new market opportunities. The results also highlight the need for destination marketing organizations to be alert to changes in airline operations that may fundamentally alter their value proposition in some of the target markets that they are operating in. In the case of Virgin, the airline evolved from a low-cost airline to a full-service airline and in the process lost some customers who were pursing low-cost holiday options but gained customers who were less price sensitive.

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