Virgin Atlantic to begin expansion based on Flybe acquisition

With a change in CEO this past January, Virgin Atlantic began a new strategic plan: The Velocity Programme.

One of the key aspects of Velocity is a shift towards business passengers rather than leisure travellers, and new routes, starting with Tel Aviv and São Paulo.

One of the things that will go is the name Upper Class for the business class seating. That’s seen as old fashioned and too elitist, so a new name has been punted about and will be revealed on April 8th with the new A350-1000 business seat roll out. Unsurprisingly Virgin Atlantic are already claiming theirs will be better than the new British Airways seat revealed last week for their A350-1000’s. Frankly they’re probably right. Let’s hope Virgin ditch the inward facing herringbone concept.

The focus for the airline will also apply in two other areas, customer service experience and partnerships.

It’ll be interesting to see how they deal with the customer service aspect. They’re not bad but they’re also not brilliant. On board and at the airport it’s usually pretty good, but on-line and phone support staff are often not empowered, or that knowledgeable.

The partnerships aspect is one the airline has no real choice but to implement. With Delta holding 49% of the shares and AF-KLM another 31% and Delta owning part of AF-KLM, expanded route and code shares are inevitable.

The real opportunity lies in the acquisition through Connect of Flybe.

Virgin Atlantic isn’t the biggest shareholder – but the agreement is to brand the whole of Flybe as Virgin – wether its Atlantic or Connect or some other iteration has yet to be revealed. Nothing will happen until the Competition Commission makes a ruling. They won’t stop the buyout but they might force the surrender of some routes, although frankly I think that’s unlikely.

Flybe is a large airline in passenger number terms – 5.8 million in the last year for a regional flyer is considered high.

Couple Virgin Atlantic’s three hubs at Gatwick, Heathrow and Manchester to Flybe’s routes to Europe and the domestic U.K. operation, and the opportunity to feed Virgin Atlantic long haul is clear.

The reverse also applies as Virgin Atlantic appeals to a different type of traveller from the US Delta hubs and AF-KLM’s in Paris and Amsterdam.

There are challenges to face with Flybe and its integration. Choice of branding will be crucial, but so will staff retention and retraining. Add to that the serious issue of making what was a loss making airline profitable, something Virgin Atlantic has hardly managed with much success in the last ten years.

Unquestionably there are opportunities. Will it mean keeping the Dash-8 fleet? Flybe also has an odd mix of E190 and E175’s. Can Flybe really feed Virgin Atlantic long haul?

When they had Little Red in 2013-15, they expected 30% of their passengers to be long haul feeder passengers. That didn’t happen and numbers barely passed 5%.

The airline also cannot be far from a decision on what to do about its A330’s. It leased in ten on ten year leases from 2010-11 when Boeing announced long delays on the 787. While leases can be extended, there’s opportunity to replace them with newer more efficient aircraft.

Indeed you could argue that for consistency and cost management, more 787-9’s would make more sense than keeping a third aircraft type in the inventory.

There’s every reason to move the airline to a two type fleet, where it now runs five (A346/744/A350/A330/787). The 744’s will soon be gone along with the A346’s. The A332’s from AirBerlin are mid term use and already elderly. The A333’s are nearing ten years old. What fleet manager wouldn’t dream of such cost saving efficiency?