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Edition 312 – Numbers Based Decisions

Written by Dean Robinson.


I’m a Virgin Australia Velocity Platinum Flyer. That means, I fly enough each year to be considered in the top tier of the airline’s customers. Some recent actions on their part would have me wonder whether that’s worth it.

I recently booked a return flight to Melbourne late on a Tuesday afternoon. It was a few weeks hence, so I had my choice of flights and seats. On the Wednesday morning immediately after making the booking, Virgin Australia emailed me to advise that one of the flights that I’d booked, the return leg from Melbourne to Sydney, was now cancelled. Their auto email forces you into either accepting their suggested change, or drives you through their website where you have to cancel your booking, then go through the whole process again.

Whilst this might sound like a whinge about a once-off, it’s actually not the first time in recent months that Virgin Australia have done this. I understand there are cancellations due to engineering or weather issues. But cancellations a number of weeks out really only comes down to one thing – the forward booking numbers don’t stack up for the airline and, for them, it’s cheaper to cancel the flight than launch an aircraft that is half full.

If you’ve been following the trials and tribulations of Virgin Australia the past few years, you’ll know they went into voluntary administration around the time COVID 19 sent the world into a tail-spin in April 2020. After a long, drawn out process, Bain Capital, a private equity player out of the USA stumped up the cash, bought the airline’s assets off the administrators, installed a new management team, then re-launched.

The issue with private equity ownership is that everything is governed by the numbers. If the numbers don’t stack up, decisions are made to stem the flow of money out the door. In other words, cuts!

The problem with this style of business management is that:

  1. Decisions are based on the here and now.
  2. There is no consideration for the long term impact on the airline’s goodwill and customer base of (in my case) frequent and frustrating cancellations.
  3. The owners are often focussed on a quick return on their investment, then bailing out whilst the share price is high, rather than the long term sustainability of the business.
  4. I’ve determined that Virgin Australia have one more chance. If they bin another flight on me in the near future, I’ll be taking my Velocity Membership that I’ve held since 2006 and walking across the car park at Sydney Airport to start flying Qantas.

I’ve determined that Virgin Australia have one more chance. If they bin another flight on me in the near future, I’ll be taking my Velocity Membership that I’ve held since 2006 and walking across the car park at Sydney Airport to start flying Qantas.

There are lessons aplenty for small and family business in today’s tome.

  1. What decisions are you making in your family business that are purely numbers based that create inconvenience and frustration for your clients and staff?
  2. What impact do those numbers based decisions have on the long term goodwill of your business?
  3. Where you’ve committed to building up the numbers over a period of time, what did you have to do to increase sales or patronage?
  4. What’s an example in your business of a numbers based decision that, in hindsight, was a monumental failure?

It’s not always about the numbers – and businesses shouldn’t be governed by spreadsheets either.

This Week’s Tip

 “Private equity doesn’t always score big on some of their deals.
Dick Smith Electronics and Archer Capital’s investment in Supercars are just two examples
of where the money evaporated..”