As Virgin Atlantic approaches its 35th year, it remains a very strong brand in the UK. However, profitability in recent years has proved elusive.
The airline reported a loss for 2017. Next year, there will be a number of significant changes to improve its financial performance. Here’s a quick run through of what to expect.
Air France-KLM & Delta
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 primarily intention is to make the combined joint-venture much more competitive against American Airlines and BA.
This is particularly because Air France and KLM can offer many destinations in Asia and Africa not served by Virgin (or indeed BA). KLM in particular also has extensive coverage of UK regional airports and can offer many connection opportunities not offered by Virgin (or again BA in some cases).
This is likely to lead to extensive reciprocal codesharing between Virgin Atlantic and Air France and KLM. Virgin may also pursue greater co-operation with Air France and KLM on non-transatlantic routes. Subject to space, Air France and KLM may also co-locate with Virgin Atlantic in Terminal 3 at London Heathrow.
As part of this, Sir Richard Branson’s Virgin Group will cede control of the airline, by selling a 31% stake to Air France-KLM. This will leave Delta as the single largest shareholder.
Sir Richard Branson has long had little involvement in the day-to-day running of the airline. However, this is symbolic as Virgin Atlantic has been the one business he has previously resisted ceding control of.
Separate to these changes, Virgin’s CEO Craig Kreeger will retire on 1 January and be replaced by an internal appointment, Shai Weiss. Shai is currently Chief Commercial Officer and and has been with the airline since July 2014.
Virgin Atlantic confirmed shortly before Christmas that it is still in discussions with Flybe about either acquiring the airline or extending its commercial partnership beyond simple codesharing.
The existing relationship is important because it provides Virgin with short-haul feed at both Heathrow and Manchester. However, there are also many Flybe flights from London City and other UK regional airports which would not support Virgin’s long-haul network.
Whilst Virgin Atlantic has had brief forays into the world of short-haul operations, as a regional airline, Flybe is a fundamentally different business to Virgin Atlantic.
Virgin Atlantic will take delivery of its first Airbus A350-1000 in 2019.
These will operate at Gatwick and Heathrow and are intended to replace all of its remaining 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 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.
The first route is likely to be to the US East Coast. The aircraft will feature an entirely new Upper Class cabin which will inevitably be marketed with Virgin’s characteristic confidence and flair.
Route Network Changes
A number of route network changes take effect from late March:
– London Heathrow – Dubai will be suspended from Sunday 31 March 2019.
– London Gatwick – Las Vegas will transfer to Heathrow from Sunday 31 March. There are also one-off frequencies from Heathrow to Las Vegas in early January for the Consumer Electronics Show.
– An additional frequency will operate on London Heathrow – Boston from Sunday 31 March, with the return flight a day flight from Boston.
New Loyalty Programme
Virgin Atlantic and Virgin Group are expected to launch a new loyalty programme in 2019 to replace Flying Club.
It will adopt Virgin Flying Club miles as its currency. Virgin Atlantic has formed a new company, Virgin Group Loyalty Company Ltd, for the new programme. This will remain wholly owned by Virgin Group.
The new company will be led by Andrew Swaffield who was formerly Managing Director of Avios Group Ltd, a subsidiary of International Airlines Group. This is probably no accident and gives an indication of Virgin’s intentions.
Virgin Flying Club has been a relatively weak frequent flyer programme compared to the BA Executive Club. This is primarily due to the relative differences in route networks and the number of airline partners.
A new Virgin loyalty programme with the ability to earn and redeem miles on short-haul flights in Europe on Air France and KLM, should be more competitive, particularly for passengers at UK regional airports.