ABTN speaks to Virgin's director of commercial and revenue planning about new aircraft, new routes, new deals and a possible new outlook.
Rose is responsible for fleet and network planning, pricing, revenue management, alliances and business development.
How are things?
Business travel continues to be healthy. It is fascinating that in this climate all the analysts talk about premium travel continuing to be buoyant and we are seeing that, particularly with late bookings on New York and the East Coast, we’ve got very healthy growth to the West Coast, helped admittedly by some new services and greater capacity for us. The Far East is also very strong.
You have new A330 aircraft being introduced this year, but they are two class – economy and premium economy – and they are on leisure routes. When will the business traveller see new services?
We will have great developments for business travellers out of Heathrow we hope next year, but the reason we are putting our new aircraft on leisure is because we have had to hold back on leisure expansion for a long time because we were waiting for the B787s, and the new aircraft fit very well with our leisure routes, so it’s always been our plan for the first step for the new aircraft.
When will the A330s arrive?
The first two have been delivered to us but are undergoing their final pre-service tweaking. And the other eight will be delivered over the next two years, and certainly next year they will be operating out of Heathrow in a three class configuration. They will have all the benefits we are getting on the new aircraft such as the fantastic IFE but also for the business traveller laptop power with standard sockets, so there’s no need for a special laptop lead. There will also be connectivity, which will enable our business travellers to use smartphones and Blackberries to do emails and some limited browsing.
You are not part of an alliance, but you do have partners.
Yes, we work with a selected number of partners on code shares, but we are careful to make sure they are relevant to where our travellers need to go. We work with a number of partners including in the Virgin stable, Virgin Blue, and we interline with V Australia and Virgin America. We are also expanding our code share partnerships to include Air New Zealand, so at the end of March we will have our code on flights to Auckland, Wellington, Christchurch, Queenstown and Raratonga via San Francisco and via Sydney. It is a great partnership for us because Air New Zealand has a very complimentary product. Their Business Premier cabin seat is licensed from us and is based on our Upper Class seat, so our passengers will feel very much at home flying with them, and their passengers will feel at home flying with us.
How will you avoid competing for the same passengers?
We will not be code sharing on any parallel routes. So we will not code share on Heathrow to Los Angeles, we code share via San Francisco and Sydney. So when you leave London, you will get a limo because you’ll be on Virgin but at the other end you won’t because you’ll be on a code share with ANZ.
What other examples of interlining do you have?
We see very good flows for example on Heathrow to San Francisco, and onto to San Diego would be an example of the sort of itineraries that we are selling. It works well because San Fran is a nice efficient airport and we have had good passenger numbers on that.
San Diego is a new destination for BA and is held up as an example of their Joint Business with AA. Can you comment on that?
This is the third time BA has attempted to serve San Diego so we’ll be interested to see how long it lasts. Also, with BA and AA we are certainly looking out to see what they are doing and to see whether they are having a negative impact on the consumer. In the case of San Diego, let’s look at the price of those direct flights.
So what about joining a global airline alliance?
We’ve constantly looked at whether we should be a member of a global alliance or not, but we get many of the benefits that we can give to our passengers working with our bilateral partners, and we are very comfortable with that. We will continue code share with airlines that have routes and services that are relevant to our passengers. Being part of a group of 20 or more airlines where you end up having some form of cooperative agreement with airlines on continents where we don’t even serve isn’t necessary to our model and it’s not necessary to our customers. Our passengers want to fly on Virgin Atlantic to Johannesburg and then on to Durban or Port Elizabeth and that’s possibly because of our code share with our SAA. They want to be able to travel from Aberdeen or Belfast or Berlin to connect with our services and they can do that with our bmi code share. They want to be able to get to the Gold Coast and Melbourne on the end of a journey to Melbourne and they can do that with our Virgin Blue code share. So we don’t necessarily see the advantage from our customers’ point of view.
What is your draw for SMEs?
We have FlyingCo, which is an excellent scheme where SMEs can sign up their travellers and earn points and benefits for the company to use for upgrades and Clubhouse entry, so it’s a very good scheme for those companies – and travellers.
And your appeal to larger corporates?
The limo is a very big part of it because we can provide that value within the fare they are paying and that saves them the cost of getting their employees to the airport at each end. Corporates really love The Wing at Heathrow where we have the drive thru check and private security channel, which is a really big plus from a product point of view and our Clubhouse is unparalleled as an airline lounge anywhere for business travellers, so particularly that on the ground is very good for travellers. And many corporates like the fact that when their travellers are on board, we have the best crew in the world, so all those products and service advantages.
What new routes can we look forward to?
We do have a list but I’m reluctant to pick any out because the route decisions for Heathrow routes are taken relatively shortly before the routes commence operations – eight or nine months before. Future operations include Latin America, Africa and Asia. We have expanded in Africa, with Accra launched last year as our fifth destination and that is going up to four flights weekly with a Monday Heathrow departure for three months of the summer. This will be very useful for business travellers who want to leave on a Monday night to get down there. And Asia undoubtedly has good opportunities for us.
What are you waiting for?
The biggest boost to our future route opportunities will be the arrival of the B787 in 2014 because the aircraft gives us much better economics so that when we start up a route we will be able to get into a profit much quicker than at present
So do you suffer with flying A340s that are thirsty aircraft?
I wouldn’t say they are. The A340-300 has very comparable fuel burn to its competitor aircraft the B777-200 so we don’t see any disadvantage there. The A340-600 has a fuel burn absolutely fine for its mission which is long haul, good distances, routes with high passenger demand and high cargo demand, so it’s good for Asian routes, Africa and West Coast. And it also gives us a large Upper Class cabin which works really well for us on routes like New York.
Why have you had this focus on Africa?
You always look to where there are several factors including GDP growth, and the African economies are growing. Secondly there are very strong historic links between the UK and African countries, which means you have got a lot of business travel and leisure, such as VFR and students, so it’s a continent that suits our operations.
Has the uncertainty about your future ownership affected corporate sales?
Not at all. We have continued to renew our corporate agreements and sign up with our new ones.