Corporates join Virgin exodus club

The future of Virgin Australia’s exclusive, invitation-only lounge, is being watched closely by corporate travellers.

Dining in Virgin Australia’s The Club at Sydney Airport. Picture: Facebook

There are early signs Virgin Australia’s new direction could prove damaging for the airline, with five of the carrier’s largest corporate customers already calling it quits.

Worth a total of $30m a year to the airline, Suncorp and four other large companies recently pulled their accounts as new owner Bain Capital prepares to relaunch Virgin as a hybrid carrier.

Of key concern to the blue-chip customers is the future of Virgin Australia’s exclusive VIP lounge, known as The Club. Developed as a counter to Qantas’s coveted Chairman’s Lounge, The Club is facing the axe by the US private equity firm, which views it as a luxury it can no longer afford.

But airline insiders say that without The Club, Virgin Australia will struggle to retain key corporate accounts for whom the privacy and comforts of the VIP lounge are a significant drawcard.

It’s a view shared by CEO and founder of Corporate Travel Management Jamie Pherous.

He said airlines servicing the lucrative golden triangle of Sydney-Melbourne-Brisbane needed to cater to the corporate market in order to survive and prosper.

“Part of enticing the corporate market is to offer a seamless experience, from how to get to the airport, going through the airport and on to the plane,” Mr Pherous said. “Corporate travel is too significant and too lucrative over those segments not to have a solution, and if you want to get some of the biggest corporations in town, you need a premium lounge.

“To have access to that lounge and to be seen in that lounge can be a status symbol for a lot of CEOs, and that’s how the market works.”

He said Australia’s domestic offering, particularly on capital city routes, had reached a world-class standard in recent years, driven by Virgin Australia’s innovation. “We think it’s very important that Virgin is supported and is ­viable for that reason,” said Mr Pherous.

A Virgin spokesman said the airline had seen some of their corporate customers “re-evaluate their travel spend” post pandemic.

He said no decision had yet been made on the future of The Club which was closed due to travel restrictions and low demand for air travel.

Like the Chairman’s Lounge, Virgin Australia’s The Club is an invitation only deal at the CEO’s discretion, with an estimated membership of about 2000.

Most of those are not necessarily celebrities or even politicians but business people who spend in excess of $1m a year on travel with the airline. Located in Sydney, Melbourne, Brisbane, Canberra and Perth airports, The Club’s precise whereabouts are generally known only to members, usually behind a set of opaque glass doors marked private.

Membership includes limousine transfers to and from the airport, and once inside The Club members can relax in roomy armchairs placed at discreet distances, while wait staff serve top-shelf liquor and a la carte meals. It’s a world away from the bright lights and buzz of the more easily accessed business lounges, where the whirr of coffee machines is as constant as the conversation.

Throughout the bidding process for Virgin Australia, after the airline was placed into administration, the future of The Club was in question.

In June, Bain Capital’s Australian managing director Mike Murphy hinted strongly that it was not part of Bain’s vision for the carrier.

“In our research, access to that club is important to a small, elite segment of our customers and not the mainstream. Whether or not we retain that is under evaluation,” he told The Australian.

At the same time, CEO Paul Scurrah was stressing its value to the airline. “The only thing I will say about (The Club) is our customers, particularly our high-tiered customers, want a differentiated level of service and we’re working through exactly how that will look once the ­demand comes back,” he said.

With Mr Scurrah now out of the airline The Club appears to be on Bain’s chopping block.

As with other lounges in the Virgin Australia network, it remains “temporarily closed”.

Aviation consultant Neil Hansford said the concept of an “invitation only lounge” began at Ansett, where owner Peter Abeles established the managers’ lounge.

“They were a very strong tool.”