The end of Virgin Atlantic as we know it? 

Richard Branson’s decision to sell 31% of Virgin Groups holding in Virgin Atlantic Airways Ltd. Is no small descision. 

Firstly it means he no longer owns the airline. 20% is the minimum requirement to hold a seat on the board of directors. At best he’ll have nothing more than an advisory role. It’s been years since he made a descion day to day, but now that option has gone as well.

Branson famously sold off his Virgin Music business and plowed the money into the airline, its been a long emotional ride, and the letter that accompanied the announcement was full of anti-BA rhetoric. He blamed them for having too much control at Heathrow, preventing Virgin acquiring new slots at Gatwick and Heathrow, and the long running dirty tricks campaign that ended in Virgin winning huge damages, most of which was paid to its staff as a Christmas bonus.

Much of it was ancient history.  The problem he highlighted was the effect of Brexit and the huge drop (15-20% average though it’s been getting better) in the £-$ rate. Airlines pay for fuel in USD and it meant that tickets sold in the US were generating 15% less in income. The profitable Virgin Holidays part of the business was also hit as most of its business is in US and Mexican destinations which suddenly became 20% more expensive for Brits to buy.

Delta has long wanted control but hasn’t been fully able to exploit that as its limited by law to a 49% holding. Air France-KLM group and Delta worked a deal with China Eastern to equity swap  for cash. Delta owns 3.5% of China Eastern. The later purchased for cash,10% of AFKLM giving it much needed cash in hand. Delta purchasing 10% of AFKLM gave it a small cash gain, but in effect the rest was used to pay for the 31% stake they bought in Virgin Atlantic. 

Dress it up as a joint venture, call it what you like, but it gives Delta complete say over the future of Virgin Atlantic. It also creates a huge immunised airline cartel if they get their way, and they will, because IAG, its airlines and American Airlines already have the same thing, even if it’s not so obviously visible as such outside of BA.

In the end being small and flexible allowed Virgin Atlantic to survive when it shouldn’t have.  However relentless airline consolidation, and the global aviation regime, which allows airlines to get away with legal cartels in the guise of a joint venture – no other business type gets such concessions – has squeezed it so hard, there’s nowhere left to move. The wiggle room has gone out of trading and Branson hasn’t got the will or interest any more to keep on fighting, and nobody else wants to take up the mantle.

Commercially the airline barely makes a small profit, after years of losses. It’s rebuilt its fleet on 787-9’s and will soon get A350’s. It has a reputation that vastly exceeds its size. It remains the only British long-haul only airline.  It offers interesting if not necessarily revolutionary products and it’s brand is exceptionally strong. 

Virgin Atlantic has more and more become an active choice. It’s not as cheap as BA anymore, it probably has some of the most expensive Premium Economy and Business class seats (Upper Class in Virgin parlance), across the Atlantic, but it still sells. And that’s it’s attraction to other airlines. It picks off a certain type of traveller, in PE and Upper especially, offering a modern almost ‘subdued radical’ alternative to the drab of United grey or the nannying of BA and its pontificating superiority it no longer deserves. Boutique airline? Yes and no. Different yes. Do they make you feel special? Definitely. And that’s what makes it different. That’s what keeps people like me flying on it.

From the minute that Mercedes S Class picks you up 100 miles from the airport to the amazing London Heathrow clubhouse, which is another world, to private security, another limo from San Francisco to your front door, it’s the only way to fly. Others do similar, but they don’t do it like Virgin Atlantic. Long may it stay that way.