Monday Briefing – 11 February 2019

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Virgin Atlantic aircraft at London Heathrow

Welcome to our Monday Briefing of the year for the week beginning 11 February 2019.

Virgin Atlantic

2019 is shaping up to be a significant year of change at Virgin Atlantic.

It’s a largely symbolic move, but when Virgin and Delta finally receive regulatory approval (subject to ongoing protests by JetBlue with eyes on slots in London) to combine their transatlantic joint-venture with Air France-KLM, Virgin Group will cede control of the airline – something Sir Richard Branson said he would never do.

Delta will become the single largest shareholder with its existing ownership of 49% of the airline, with Air France-KLM owning a 31% stake.

When Delta acquired its stake in Virgin Atlantic in 2012, this prompted a significant changes to its non-US route network at Heathrow.

And we’re starting to see signs of new changes. Yesterday, Virgin confirmed it will launch London Heathrow – Tel Aviv from September this year.

Like Virgin moving Las Vegas from Gatwick to Heathrow next month, this is likely to be driven by the need for better quality revenue on Delta and Virgin’s transatlantic routes at Heathrow.

When the combined transatlantic joint-venture launches, Virgin will not only benefit from joint-marketing by Air France-KLM, but also access to detailed passenger data on its traffic flows, so expect more changes.

SAS Launches Stansted – Copenhagen

If anyone was to compile a list of the top strategic failures of airlines, or warning signs of airlines in trouble, selling off Heathrow slots would be at the top.

The temptation is understandable. In 2008, keen to secure access to Heathrow in advance of EU – US Open Skies, Continental paid a record $209m for four slot pairs. It’s a relatively easy source of cash.

However, all the evidence points to the fact it never solves underlying problems. There is a long list of failed or still troubled airlines that sold off Heathrow slots (Alitalia, bmi British Midland, Cyprus Airways) but to no avail.

SAS Scandinavian Airlines is to transfer one of its six daily return flights to Copenhagen from Heathrow to Stansted from Monday 8 April 2019. It’s not yet clear what will happen to the slot, or whether this is the start of a broader transfer. SAS still retains a substantial presence at Heathrow. However, the more it cuts its schedule, the less competitive it becomes against a rival with ample slots at Heathrow to respond.

Alitalia

On the subject of Alitalia, the Italian press report on going discussions about the acquisition of the airline.

Delta seems keen to acquire a small minority stake in Alitalia, to stop its transatlantic routes being subsumed by Lufthansa and the Star Alliance, but not without the aid of another European airline.

Il Sole 24 Ore reports that Delta is in discussions with Air France-KLM. Meanwhile, Corriere della Sera reports that Delta is in discussions with easyJet.

The Italian state infrastructure company Ferrovie dello Stato is also expected to ultimately hold a substantial interest in the airline. This is not as strange as it may seem – the Italian post office, dubbed by IAG CEO Willie Walsh as better shareholder than Etihad, once owned a stake in Alitalia.

Vueling suspends London Heathrow – Barcelona

Vueling has suspended London Heathrow – Barcelona from Sunday 31 March 2019.

The airline will continue to serve La Coruna from Heathrow. At the same time, BA is suspending London Gatwick – Barcelona, which will be compensated for in part by increased frequency from Heathrow.

In case you missed it:

Long before anyone spoke of “disruptors” or “big data”, 40 years ago a small US regional airline launched the single biggest influence on passenger behaviour: the frequent flyer programme. (London Air Travel)

50 Years of The Queen Of The Skies. (London Air Travel)

BA to move to New York JFK Terminal 8 in 2022. (London Air Travel)

£100 off BA economy and premium economy long-haul flights for 5,000 Avios. (London Air Travel)

Also of note this week:

Boeing is accused by anonymous sources of manipulating its cash flows to exceed Wall Street forecasts. (Seattle Times)

Boeing 787 Dreamliner issues have now been running for a year for airlines. One Boeing 787-8 at BA has been grounded for almost a year and Virgin says that up to three Boeing 787-9 aircraft are grounded at any one time. (Financial Times)

Campaign makes BA’s latest ad its Pick of the Week: “What could so easily have ended up being yet another exercise in tiresome and superficial box-ticking is saved by some beautiful writing and artful filming, giving a brand that is sometimes difficult to love some much-needed heart.” (Campaign)

Late Post Publication Updates

[Reserved for updates during the day.]

British Airways launched a new dedicated section on its website to assist customers affected by disruption ba.com/helpme

International Airlines Group has announced a cap on non-EU investors, who include UK shareholders, in order to comply with EU ownership rules. (IAG)

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