COMMENT: ON THE SOAPBOX: Sir Richard Branson
As an entrepreneur, I take risks and look for opportunities to invest and back my own judgement. Nothing frustrates me more than when bureaucracy, regulations and red tape unnecessarily prevent me from pursuing an opportunity.
It is ironic that of all the industries with which I am involved, aviation, the one that has done the most to open up the world to entrepreneurs and to encourage globalisation, is the one which is most regulated.
Of course, some of these regulations, especially where they relate to safety and security, are important and necessary, but the ones relating to the nationality of the ownership and control of airlines most certainly are not. They are outdated, outmoded and out of touch with modern reality. The majority of world aviation is governed by the aeronautical authorities in the US and in Europe. Consequently the ongoing discussions between the European Commission and the United States Government represent a real opportunity to set a global precedent for changing these rules. They also provide an opportunity to ensure that where such rules are necessary, airlines on both sides of the Atlantic have to comply with the same, or at least similar ones.
I very much hope that the authorities on both sides of the Atlantic seize this opportunity to drag the aviation industry out of its 19th Century mindset, one characterised by mercantilism and bilateral agreement, and bring it at last into the 21st Century of open markets and free trade. If they don”t, they will deserve all the criticism that will surely come their way. It is just not good enough to pursue limited so-called ”open skies” deals. Such agreements were indeed progressive when first introduced. But it is time to move on. It is now over 100 years since the Wright Brothers launched the air transport industry. As I have said many times before, aviation is now a mature industry, able to stand on its own feet. It is about time governments got the message and started to treat it as such.
Virgin Atlantic has always supported competitive aviation markets with a minimum of government involvement. We have consistently (unlike a certain other British airline) lobbied for an EU/US Open Aviation Area. But our support is dependent on any deal being balanced and truly pro-competitive. Anything less would be a great disappointment, as well as a lost opportunity. The EU and US have the chance to make a real difference to this industry, not only across the Atlantic, but globally. As my friend, Sir Rod Eddington, said recently: ”No deal is better than a bad deal.”
An Open Aviation Area should not just be about market access, it should also require the authorities on both sides of the Atlantic to work together to produce a common regulatory framework in those areas where intervention is still necessary. To use a sporting analogy, under an Open Aviation Area, US and EU airlines will all be playing on the same pitch. But if there”s no common set of rules, half the players will be playing American football while the others play rugby. It would result in chaos and would be unfair to many of the participants. Consequently, a level playing field is an essential prerequisite of an opening of the marketplace.
A significant element that currently tilts the playing field steeply in favour of US carriers is Chapter 11 bankruptcy protection. Four major US carriers: US Airways, United, Northwest and Delta, are now enjoying the protection of being able to continue flying while attempting to sort out their finances. Chapter 11 is being used as a means of forcing workers to accept job cuts, pay cuts and reduced pension rights and to force creditors, including suppliers, to write off debts. Yet despite being in Chapter 11, Delta have just announced ”the largest international expansion in its history”. Virgin Atlantic welcomes competition but when the competition doesn”t have to pay their bills, I believe we have good reason to complain and to ask the authorities to redress the balance. As I said, we all need to play under the same rules.
Yet Virgin Atlantic has been accused of being protectionist, of pursuing a radical trans-Atlantic deal because we know it is unachievable. Nothing could be further from the truth. We support an Open Aviation Area partly because it just seems so self-evident to us that this is the right way to go, and partly, let”s admit it, because we believe in the longer term open markets will benefit Virgin. We have demonstrated time and time again that we do not fear competition; indeed, we positively revel in it. When I created Virgin Atlantic 21 years ago I didn”t look for protection, or niche markets well away from industry”s big boys. Our first service was on the largest intercontinental route in the world, against some of the largest and most aggressive airlines in the world which had already shown the lengths to which they were prepared to go to protect their cosy existence when they helped to force Freddie Laker out of business.
Does that sound like a company that is afraid of competition? Of course not. And don”t forget that it was Virgin that created the first low cost intra-EU airline following the liberalisation of air services within the European Union. It was Virgin that created the first Australian low cost carrier when the Australians agreed to allow 100% foreign ownership of domestic airlines. The fact is that the opening up of aviation markets, and especially the removal of the outdated airline ownership and control rules, creates fantastic opportunities for Virgin to expand globally. That is good news for us, but good news as well for consumers.
The other side of the coin, of course, is that Virgin Atlantic will face more competition, including at its home base at Heathrow Airport. Good. We have nothing to be frightened of. We are confident enough to believe that we have the best product on the North Atlantic, especially for business passengers. We have always been known for our innovation and those of you who have experienced our award-winning new Upper Class Suite will know that we have not lost our touch or our leadership. Combine that with low costs, and hopefully you will appreciate why the comments that we are protectionist are nonsense. It has taken us 21 years to build up, against all the odds, to just 3% of Heathrow”s slots. But what an impact those 3% of slots has had!