Why Does Virgin Atlantic Want To Buy Flybe?

Virgin Atlantic has confirmed it’s looking at a potential bid for Flybe.

London Air Travel » Virgin Atlantic

Flybe and Virgin Atlantic
Flybe and Virgin Atlantic

Following Sky News’ exclusive report on Thursday evening, Virgin Atlantic has confirmed it is in discussions about a possible bid to buy Flybe.

Flybe announced a little over a week ago that it had put itself up for sale and has appointed advisors to manage the process.

At the outset there are some caveats.

When a business announces it is up for sale, it is to be expected that many parties will come forward to have a good look at the books. Few will ultimately submit a bid.

Ordinarily, their identities are supposed to be confidential. When prospective purchasers are leaked to the media, it is usually deliberate and for a reason. More names may appear in the press this weekend.

Given Virgin’s existing codeshare relationship and the potential impact of a change in ownership it is to be expected that Virgin will take an active interest in the process.

With Virgin’s track record you could be forgiven this was simply a means of generating press coverage. When Lufthansa sold bmi seven years ago Virgin made a lot of noise about making a bid. It was not seen by Lufthansa as anywhere near as credible as the bid by International Airlines Group. So much so that the only alternative was liquidating the airline.

However, the fact that Virgin has appointed Rothschild to advise suggests it is serious in its intent.

Why would an exclusively long-haul airline want to buy a regional airline that barely touches the airports it serves?

Virgin Atlantic and Flybe

Virgin Atlantic does have an existing codeshare relationship with Flybe.

It relies on Flybe to provide short-haul feed, principally at Heathrow and Manchester. Flybe’s routes from Heathrow to Aberdeen and Edinburgh use remedy slots released by BA as a condition of its merger with bmi. Virgin tried unsuccessfully to use these slots itself, wet leasing aircraft from Aer Lingus under the brand “Little Red”. Should Flybe withdraw from Heathrow for any reason, these would revert back to BA.

There is another factor: Air France-KLM. It is due to take a stake in Virgin next year. Air France-KLM and Virgin will combine their respective transatlantic joint-ventures with Delta into one to compete more effectively with American Airlines and BA. Air France relies on Flybe to provide feed to Paris Charles de Gaulle from some UK regional airports. Flybe’s UK regional network could be optimised to feed all four airlines.

That said, there are a lot of things that don’t make sense.

Virgin is loss-making and has much else to do next year. Long-haul and short-haul regional operations are radically different. Flybe has substantial operations at airports of little strategic interest, Cardiff, Exeter, London City, Norwich, Southampton. A lot of politically unpopular decisions would have to be made. If Virgin wants to acquire more short-haul feed at Heathrow and Manchester – and this is the dilemma facing any potential purchaser – there are other ways to go about it than buying Flybe.

Expect this to run and run over the next few months.

Virgin Atlantic’s Airbus A350-1000

In early 2019, Virgin Atlantic will take delivery of the first of 12 Airbus A350-1000 aircraft.

London Air Travel » Virgin Atlantic

CGI Virgin Atlantic Airbus A350-1000 aircraft
CGI Virgin Atlantic Airbus A350-1000 aircraft (Image Credit: Happy Ending / Bolder Creative for Virgin Atlantic)

Next year, Virgin Atlantic will take delivery of the first of 12 Airbus A350-1000 aircraft.

These will operate at Gatwick and Heathrow and are intended to replace all of its remaining 8 Boeing 747-400 aircraft which operate principally from Gatwick, and its Airbus A340 aircraft at Heathrow.

The first three Airbus A350-1000 aircraft are currently in production at Airbus in Toulouse. The first aircraft, registration G-VLUX, will be delivered in early 2019 and will operate from London Heathrow. All aircraft are expected to be delivered by the end of 2021.

There will be two configurations for Gatwick and Heathrow. The Gatwick fleet will have seating for up to 410 passengers. The Heathrow fleet will have seating for up to 360 passengers. This compares to a confirmed number of 331 seats for BA’s Airbus A350-1000.

Virgin has not confirmed the first route, but has said it will be a “key” US route. Virgin will be the first operator of the Airbus A350 on direct transatlantic routes from London. An obvious choice is an East Coast destination such as Boston or New York as it’s relatively short and there is back-up if there are operational problems. The inaugural Boeing 787 route in 2014 was Boston. It should be noted that there may be gaps in the first passenger Airbus A350-1000 flights if additional crew familiarisation flights – which operate without passengers – are necessary.

Virgin has promised innovations in all cabins, economy, Premium and Upper Class. It has promised an entirely new Upper Class suite. This will be the first radical redesign since the Upper Class suite was introduced in 2003.

BA is also expected to take delivery of its first Airbus A350-1000 in July 2019 and has also promised a radical redesign of its Club World cabin. This is the first time both airlines are introducing a new aircraft type and a new business class cabin within a matter of months in the same year. Both airlines have long-standing and quite radically different business class configurations, each with their own advantages and trade-offs. It is going to be interesting to see how they compare and how both airlines differentiate themselves – in terms of both actual design and PR. Both airlines have remained tight-lipped about their exact designs.

A combination of improved cabin comfort on the Airbus A350-1000 and the latest seat designs should certainly make it the preferred aircraft for transatlantic flights.

Virgin Atlantic’s “Depart The Everyday” TV ad campaign

Virgin Atlantic & Virgin Holidays have launched two new ad campaigns based around the concepts of “Depart The Everyday” and “The World Is Your Playground”.

London Air Travel » Virgin Atlantic

Virgin Atlantic
Virgin Atlantic “Depart The Everyday” TV advertising campaign September 2018 (Image Credit: AMVBDDO for Virgin Atlantic)

Virgin Atlantic has launched a new TV advertising campaign under the banner of “Depart The Everyday”.

Filmed in a mock-up Virgin Atlantic aircraft cabin, you see passengers depart a dreary and overcast UK and enter into a surrealist world in all three cabins at 38,000 feet.

The aircraft hold is a ball pool. Passengers dance on the ceiling. The air vents dispense rainbow ice cream. Of course, no Virgin Atlantic TV advertisement would be complete without a shot of its signature Upper Class bar and suite. It exudes Virgin Atlantic’s characteristic self-confidence.

Virgin Atlantic
Virgin Atlantic “Depart The Everyday” TV advertising campaign September 2018 (Image Credit: AMVBDDO for Virgin Atlantic)

The soundtrack to the ad is Chaka Khan “Like Sugar”. It is directed by Salomon Ligthelm for Stink Films.
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Virgin Atlantic to launch new loyalty programme

Virgin Atlantic and Virgin Group have announced they are to launch a new loyalty programme in 2019 which will use Virgin Flying Club miles as its currency.

London Air Travel » Virgin Atlantic

Virgin Atlantic Logo
Virgin Atlantic Logo (Image Credit: Virgin Atlantic)

Virgin Atlantic & Virgin Group have today, Monday 20 August 2018, announced they are to launch a new group loyalty programme in 2019.

At present, Virgin Group and Virgin Atlantic have separate loyalty programmes. Virgin Group operates Virgin Red which issues points for customers of numerous Virgin branded businesses. The rewards are relatively modest, such as free WiFi on Virgin Trains. Virgin Atlantic also operates its own frequent flyer programme Virgin Flying Club.

In 2019, Virgin Atlantic and Virgin Group will launch a new, and as yet unnamed, programme. It will adopt Virgin Flying Club miles as its currency.

The New Programme

Details of the new programme are scant at the moment. Virgin Atlantic has provided a brief update for its Flying Club members.

It can be said with confidence that one new partner will be Air France-KLM. In April 2019, Air France-KLM, Delta and Virgin Atlantic will launch a new combined transatlantic joint-venture. It was confirmed in a regulatory filing that Virgin frequent flyers would be able to earn and redeem miles on Air France-KLM.
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Air France-KLM, Delta, & Virgin Atlantic’s Joint-Venture Plans

Air France-KLM, Delta and Virgin Atlantic have set out their plans to combine their respective transatlantic joint-ventures.

London Air Travel » Virgin Atlantic

KLM, Air France, Delta, Virgin Atlantic Tailfins (Image Credit: Delta Air Lines)
KLM, Air France, Delta, Virgin Atlantic Tailfins (Image Credit: Delta Air Lines)

Air France-KLM, Delta and Virgin Atlantic have this week sought regulatory approval from the Department of Transportation in the United States to combine their respective transatlantic joint-ventures.

The documents they have submitted as part of this process give a flavour of what we can expect when the combined joint-venture takes effect.

Delta and Virgin Atlantic have operated a joint-venture between the UK and USA since 2013 and wish to combine this with Delta’s joint-venture with Air France-KLM. Delta owns 49% of Virgin Atlantic. When the joint-venture completes, Air France KLM will acquire a stake in Virgin Atlantic from Virgin Group, making Delta the single largest shareholder.

Headline Changes

– The airlines have expressed a desire to co-locate at London Heathrow. Given Virgin Atlantic’s significant investment at Terminal 3, this would most likely mean Air France and KLM moving from Terminal 4 to 3.

– Virgin Atlantic will codeshare on Air France and KLM flights from UK airports to their respective hubs in Paris Charles de Gaulle and Amsterdam.

– Virgin Atlantic will also codeshare on Air France and KLM flights around the world, thus offering significantly more booking options to Virgin Atlantic passengers.

– Virgin Atlantic will retain its own frequent flyer programme, but with earning and redemption opportunities on Air France and KLM flights.

In practice, this is likely to be rolled out progressively and codeshares may only be available for certain routings, eg when connecting to/from certain destinations covered by the joint-venture.

Competing Against American Airlines and British Airways

A clear theme is a desire/need for Virgin Atlantic and Delta to be a stronger competitor against BA and Oneworld at London Heathrow and in the UK market, particularly for corporate customers and frequent flyers.

The combined joint-venture sees it itself as a much stronger competitor in UK regional airports such as Manchester and Glasgow where it can offer both direct flights to the US and connections via Amsterdam and Paris Charles de Gaulle.

Air France and KLM can also compensate for Virgin’s relatively weak non-US network where it can offer codeshares to a very large number of worldwide destinations. Indeed, Air France and KLM serve very many destinations in Africa and Asia that are not served by BA.

As Virgin Atlantic reported a loss in 2017, achieving higher margin corporate revenue and cost savings from merging back office functions will be critical to its future.

There is a degree of irony in this submission in that BA and KLM did once explore a merger. This was arguably one of the greatest missed opportunities in aviation. The plan for co-operation between Virgin and Air France-KLM was very much that could have been explored between BA and KLM. It will be interesting to see how American Airlines and BA respond, both at Heathrow and at UK regional airports.
Continue reading “Air France-KLM, Delta, & Virgin Atlantic’s Joint-Venture Plans”

Virgin Atlantic suspends London Heathrow – Dubai

Virgin Atlantic has suspended its daily service from London Heathrow to Dubai from Sunday 31 March 2019.

London Air Travel » Virgin Atlantic

Virgin Atlantic aircraft at London Heathrow
Virgin Atlantic aircraft at London Heathrow (Image Credit: Heathrow)

Virgin Atlantic has suspended its daily service from London Heathrow to Dubai from Sunday 31 March 2019.

The route was taken off sale today, Wednesday 27 June 2018. Virgin Atlantic has been flying to Dubai since March 2006. Its suspension follows the the cancellation of a number of routes outside of North America from London Heathrow including Accra, Cape Town, Mumbai, Nairobi, Sydney, Tokyo Narita, and Vancouver.

There will be of course continue to be substantial capacity between London and Dubai with Emirates operating six A380s a day from London Heathrow alone, as well as three times daily flights from Gatwick and daily flights from Stansted. BA will also continue to fly to Dubai up to three times daily from London Heathrow.

Virgin has not yet announced any re-accommodation arrangements for displaced passengers. However, if your flight is cancelled you are entitled to a full refund.

Virgin Atlantic CEO Craig Kreeger to retire

Virgin Atlantic’s CEO Craig Kreeger is to retire from the airline from 1 January 2019. Craig will be replaced by Shai Weiss.

London Air Travel » Virgin Atlantic

Virgin Atlantic Logo
Virgin Atlantic Logo (Image Credit: Virgin Atlantic)

Virgin Atlantic has today, Thursday 21 June 2018, announced that its CEO Craig Kreeger is to retire from the airline from 1 January 2019.

Craig Kreeger will be replaced by an internal appointment, Shai Weiss. Shai is currently Chief Commercial Officer and and has been with the airline since July 2014 having previously worked with a number of Virgin businesses.

Craig joined Virgin from American Airlines where he was closely involved in the launch of its transatlantic joint-venture with BA in 2010. This was in itself a radical departure for Virgin which had traditionally appointed senior executives from within.

“Plan To Win”

During his tenure Craig oversaw a number of radical changes.

These included the launch of Virgin’s transatlantic joint-venture with Delta, a reshaping of its route network, a slimming down of its Head Office, and the renewal of Virgin’s fleet with the delivery of 17 Boeing 787-9 Dreamliner aircraft.

Craig was also the architect of Virgin’s “Plan To Win” which was intended to secure record levels of profitability by 2018, by beating the previous record of £98m in 1999.

Whilst Virgin is still a very strong brand and can market itself with a confidence and flair that few can match (aided in part by BA’s continued ability to throw PR banana skins in front of itself), consistent profitability has proved elusive. Virgin reported a loss of £28.4m before exceptional items for 2017.

“Velocity”

The next 12 months or so should see one of the most significant events in Virgin Atlantic’s 34 year history.

Virgin and its 49% shareholder Delta are in the process of securing regulatory approval to combine their transatlantic joint-venture with that of Delta and Air France-KLM. The latter joint-venture launched in 2009 and traces its origins back further to joint-ventures between KLM and Northwest Airlines and Air France and Delta.

As part of this, Sir Richard Branson’s Virgin Group will cede control of the airline, by selling a 31% stake in the airline to Air France-KLM. This will leave Delta as the single largest shareholder.

Virgin has today alluded to a new corporate plan which will succeed “Plan To Win”. Known as “Velocity” (and not to be confused with Virgin Australia’s frequent flyer programme), this will include the launch of the combined joint-venture with Air France-KLM. Previous announcements have indicated that this will include cost savings such as co-location at airports (which would be difficult to achieve at Heathrow) and reciprocal frequent flyer recognition.

However, not much else has been said.

2019 is already shaping up to be a significant year for Virgin Atlantic with the arrival of the first of 12 Airbus A350-1000 aircraft which will operate at both Heathrow and Gatwick. Further developments will be awaited very much with interest.

Virgin Atlantic to move Las Vegas route to Heathrow

Virgin Atlantic is to move its daily flight to Las Vegas from London Gatwick to Heathrow Terminal 3.

London Air Travel » Virgin Atlantic

Virgin Atlantic aircraft at London Heathrow
Virgin Atlantic aircraft at London Heathrow (Image Credit: Heathrow)

Virgin Atlantic has today, Wednesday 16 May 2018, announced a series of changes to its transatlantic route network.

As part of these changes, Virgin is to move its route to Las Vegas from Gatwick to Heathrow from Sunday 31 March 2019.

Virgin Atlantic has flown from London Gatwick to Las Vegas since June 2000. At the time it was the only airline to fly direct to Las Vegas from London. That was until BA launched its own route from Heathrow in October 2009. Virgin has also operated limited flights from London Heathrow for the Consumer Electronics Show.

Due to the move the flight will switch from a Boeing 747 to Boeing 787. This means a significant increase in Upper Class seats from 14 to 31 and a decrease in premium economy seats from 66 to 35 and economy seats from 375 to 192. The additional flight at Heathrow will be accommodated by a reduction in frequency on London Heathrow – Los Angeles.

Operating from Heathrow will enable Virgin to compete against BA which offers substantially more premium capacity with its Boeing 747 service from Heathrow.

BA will continue to fly to Las Vegas from Gatwick year-round. Norwegian also flies from Gatwick to Las Vegas on a winter seasonal basis from 5 November 2018.

London Heathrow – Las Vegas

Flight VS155 Depart London Heathrow 12:40 – Arrive Las Vegas McCarran International 15:25
Flight VS156 Depart Las Vegas McCarran Internaional 19:05 – Arrive London Heathrow 12:55

Additional Boston Frequency

Virgin Atlantic has also announced an additional flight to Boston will launch on Sunday 31 March 2019.

It will be operated by an Airbus A330-300 aircraft. An additional transatlantic day flight is certainly welcome.

Flight VS157 Depart London Heathrow 20:30 – Arrive Boston Logan International 23:00
Flight VS158 Depart Boston Logan Internaional 19:05 – Arrive London Heathrow 20:10

These flights will be on sale at Virgin Atlantic from Saturday 19 May 2018.

Virgin has also confirmed that winter seasonal flights from London Heathrow to Barbados will return on Tuesdays and Saturdays from Tuesday 11 December 2018 to Saturday 23 February 2019.

Virgin Atlantic reports a loss for 2017

As Virgin Atlantic reports a loss for 2017, we take a look at the competitive challenges facing the airline.

London Air Travel » Virgin Atlantic

Virgin Atlantic aircraft at London Heathrow

Virgin Atlantic has reported a financial loss for 2017.

Bloomberg reports that the airline lost £28.4m before exceptional items.

This compares to a profit of £23m for 2016. This is Virgin Atlantic’s first loss after three consecutive years of profit. Passenger numbers fell by 100,000 to 5.3m.

Virgin has cited numerous causes for its loss

These are: The fall in the value of the pound following the 2016 EU Referendum result; disruption to flights to Florida and The Caribbean due to Hurricane Irma; and engine maintenance to its Boeing 787-9 fleet which has necessitated leasing in aircraft from other airlines.

These are made with some justification. Virgin is a “dollar short” company. It has more expenses than revenue in dollars which means it is exposed to a fall in the pound. One reason why BA’s parent IAG bought Aer Lingus is because it is a “dollar long” company.

Virgin is also not alone in reporting financial loss. Norwegian reported a loss in 2017. Cathay Pacific has also reported a second consecutive annual loss.
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Virgin Atlantic launches new unbundled economy products

Virgin Atlantic is to launch three new economy products from Spring 2018: Economy Delight; Economy Classic and Economy Light

London Air Travel » Virgin Atlantic

Virgin Atlantic aircraft at London Heathrow

Virgin Atlantic has today, Wednesday 7 March 2018, announced it is to launch a new series of tiered economy products.

An announcement has been made to the travel trade and press and Virgin has also posted a blog on its main website. However, the precise dates and means of implementation, other than a launch in Spring 2018, have not been confirmed.

In a widely anticipated competitive response to American Airlines and British Airways launching basic economy fares, Virgin is to offer three different economy products.

These changes also broadly align Virgin’s economy products to those of its transatlantic joint-venture partner, Delta Air Lines.

The three products are:

1. Economy Delight

This will be Virgin’s leading economy product.Passengers will enjoy a seat pitch of 34″. Virgin currently offers extra leg room seats for a separate charge. There will be up to 36 Economy Delight seats on every aircraft and Virgin is to retrofit these seats to aircraft.

Passengers will also benefit from priority check-in and priority boarding. It is broadly similar to Delta’s Comfort+.

2. Economy Classic

This is effectively the same as Virgin’s current economy product.

However, passengers will be able to select a seat at the time of booking for free. Currently, Virgin charges a fee for a seat assignment in advance of online check-in, except for certain classes of fare.

3. Economy Light

This is an entirely new fare and is the equivalent of “basic economy”.Passengers will not receive a free checked luggage allowance. Nor will they be able to choose a seat for free at check-in. These fares are also non-refundable and cannot be changed.

All passengers will receive continue to receive free food & drink, in-flight amenities as well as access to the in-flight entertainment system.

This move was inevitable, not only because American Airlines and British Airways are to launch basic economy fares, but also its transatlantic joint-venture partner Delta now offers basic economy fares. Though it has of course been done in characteristic Virgin Atlantic style. Announcing “Economy Delight” is clever move as it detracts from headlines about scrapping free checked luggage.

Separately, Virgin has also announced the introduction of automated bag drops at London Gatwick and Heathrow. The airline has also confirmed that the first of its 12 Airbus A350-1000 aircraft will be delivered from spring 2019.