In 2020, Virgin Australia collapsed under financial pressure. Many blamed the pandemic. However, pricing strategy played just as big a role—if not a bigger one. Fast forward to 2025, and Virgin is making a comeback, returning to the ASX with the backing of Qatar Airways and a $685 million IPO—this time with a sharper focus on a value based pricing model that prioritises trust, margin, and long-term growth.
This isn’t just a story of recovery. It’s a real-time case study in how pricing decisions can make or break even the biggest players. For airlines and similarly scaled businesses, pricing is about strategy, identity, and long-term viability.
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Why Discounting Isn’t Always the Answer in Airline Industry Competition
Before its collapse, Virgin had spent years competing with Qantas in a brutal price war. Fares dropped. Offers ballooned. And while passengers enjoyed the short-term deals, the company’s margins suffered.
Virgin was chasing volume at the expense of value. Instead of leaning into its brand strengths—comfort, experience, and reliability—it tried to undercut the competition. In an airline industry already defined by tight margins and high stakes, the strategy blurred its identity and weakened its positioning.
The result? Confusion in the market, a diluted brand, and unsustainable operating costs. It was a misstep in pricing and revenue optimisation—one that overlooked the power of a value based pricing model tailored to customer perception, not just price tags.
In pricing, growth without margin protection is a dangerous game. And for Virgin, it proved fatal.
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Virgin Australia’s Rethink of the Value Based Business Pricing Model
Now, Virgin is relaunching with a different playbook. With Qatar Airways as a 25% shareholder and fresh capital from its IPO, the airline is aiming for stability over speed.
The pricing approach? No more rock-bottom fares. Instead, Virgin is embracing a value based pricing model. The fare structure is tiered and targeted: Lite, Choice, Flex. Each option aligns with a different customer segment—leisure, business, and corporate travellers—offering just enough flexibility or perks to justify the price.
This shift supports a smarter airline revenue model and reflects a stronger focus on pricing and revenue optimisation. It’s not about being the cheapest anymore. It’s about delivering value people will pay for—and protecting margins while doing it.
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Why Value Based Model Works in Pricing and Revenue Optimisation
Airlines don’t just sell seats. They sell time, comfort, convenience, and confidence. Add in volatile fuel prices, seasonal swings in demand, and loyalty programs, and pricing becomes one of the most complex decisions in the business.
That’s why a value based pricing model works. It allows airlines to:
- Adjust fares by route, time, and customer segment
- Create upsell opportunities through service tiers
- Stay competitive without devaluing the brand
Virgin is putting this into action. Its Flex fare, for example, is priced higher but offers free flight changes and better refund policies. According to Flight Centre data, business travellers are choosing it up to five times more than the basic Lite fare. The value is clear, and customers respond.
In a market shaped by fierce competition in the airline industry, this pricing and revenue optimization approach helps Virgin protect margins while meeting varied traveller needs.
What Makes a Value Based Pricing Model Sustainable?
Many businesses price reactively. A competitor drops prices, so they follow. A customer pushes back, so they discount. But that’s not strategy—that’s survival mode.
A sustainable pricing model does four things:
- Builds on customer value, not just competitor prices
- Protects margins, even when demand softens
- Aligns with brand identity—premium or practical
- Adapts to change, without losing control
Virgin’s new value based pricing model checks all four. It’s flexible, data-informed, and built around what different travellers actually want—an approach that strengthens its airline revenue model while enabling smarter pricing and revenue optimisation.
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Applying the Lessons to Your Business
You don’t need to run an airline to learn from this.
Say you’re a regional logistics provider, a healthcare group, or a large-scale digital service. You likely face the same pricing pressures: high operating costs, aggressive competitors, and customer expectations shaped by discounts.
Don’t fall into the volume trap. Instead:
- Segment your offer like Virgin’s fare brands—each tier meets different needs (price segmentation)
- Build a value based pricing model rather than relying on outdated cost-plus pricing
- Avoid reactive discounting—it trains customers to wait for deals
- Use pricing as a signal of quality, trust, and brand promise
Strategic pricing isn’t just about profit. It’s about predictability, positioning, and protecting your future.
The Role of Data and Insights in a Value Based Pricing Model
In a value based pricing model, data and insights act as the navigation system—especially for businesses with complex operations. If you want your pricing to matter, you must make your decisions matter.
For example, consider how an airline uses search-history, booking patterns and market snapshots to guide fare design. These inputs feed the model so the price reflects what customers value, not just what seats cost. This is exactly what gives a value based pricing model its edge.
Then imagine a logistics company that records customer usage, service flexibility and downtime costs. It discovers that one segment values fast response more than low cost. So it revises its pricing tiers and aligns its model to that segment. That shift—underpinned by solid insight—is exactly how a value based pricing model enables smarter choice.
Next, businesses often rely on competitor benchmarking instead of deep customer insight. They copy a rival’s discount and assume volume saves the day. In reality, in a value based pricing model you map customer-perceived value, measure elasticity and protect margin. In aviation research IATA notes how real-time “shopping data” reveals demand patterns that traditional yield management misses.
Additionally, the model benefits from ongoing measurement. You don’t price once and forget. For example an airline trial shows data-driven models boost revenue per seat by double-digits. If you treat pricing like infrastructure—rather than reaction—you win.
In short, for a value based pricing model to work you must leverage insights, measure what customers value and adapt your pricing accordingly. Build your data-foundation now. Then let those insights shape your prices, protect your margins and support your long-term strategy.
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What Virgin’s Return Tells Us About the Value Based Pricing Model
Virgin Australia’s story is more than a turnaround. It’s a clear reminder that pricing isn’t just about numbers—it’s about long-term pricing strategy.
The collapse showed how chasing low prices without protecting margins can bring down even major players. The comeback shows how a value based pricing model, aligned with customer value, rebuilds trust and delivers sustainable growth.
For airlines—and any business operating at scale—the message is simple: being the cheapest isn’t sustainable. Being the most trusted is.
If you’re rethinking your pricing model or looking for a more sustainable pricing approach, you’re not alone. Let’s talk. Whether you need a sounding board or fresh ideas, we’re here to help you find the right balance between value, trust, and profit. Reach out anytime—it’s a conversation worth having.
For a comprehensive pricing strategy to prevent revenue loss in your company, Download a complimentary whitepaper on How to Avoid Pricing Chaos.
Are you a business in need of help aligning your pricing strategy, people and operations to deliver an immediate impact on profit?
If so, please call (+61) 2 9000 1115.
You can also email us at team@taylorwells.com.au if you have any further questions.
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