Where will Virgin Atlantic be in five years?
A continuing trend towards airline consolidation
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Eugene Gold Saturday 19 June 2010 |
There does appear to be a continuing trend towards airline consolidation. It is now six years since Air France and KLM merged and we have seen Lufthansa’s expansion continue to include Brussels Airlines in Belgium and bmi here in the UK.
The big one on the horizon, in the wake of British Airways and Iberia is, of course, BA and American Airlines. This has caused growing angst in the industry with Sir Richard Branson being the chief opponent.
Although Virgin Atlantic is 49% owned by Singapore Airlines, and does have a number of code-share agreements, the airline has remained fiercely independent.
At one level, it has not sought to join an alliance as it does not seek to compete across all markets. Unfortunately, if it wants to survive, it may have to sacrifice some that independence. The hard fact is that a BA-AA tie up will further squeeze landing slots at Heathrow and could make life very hard for Virgin Atlantic.
If the time comes for Virgin Atlantic to find a partnership, the question will be with whom? The ideal choice would have been the old British Midland (bmi) partly because of a shared culture and also because of bmi’s landing slots at Heathrow. The perceived wisdom was that the bmi’s short-haul routes matched Virgin’s long-haul profile. Sadly, Lufthansa’s purchase of bmi may have scuppered that option.
Perhaps a more pertinent question is where Virgin Atlantic sees itself in five years time. It is, beyond any doubt, extraordinarily successful as a leisure airline operating out of Gatwick and Manchester in conjunction with Virgin’s other travel assets. It also does a very credible job as a business airline from its base at Heathrow. The problem is that it will find it increasingly hard to compete in the long-haul business market against a competitor of the size of BA-AA.
For us, the passengers, there are some important issues. Virgin Atlantic followed in the footsteps of Sir Freddie Laker and challenged the dominance of the big airlines. That competition has been good for passengers. I think we should be wary when the Goliaths start ganging up on the Davids.
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Justin Wilks, Cambridge 21 June 2010, 11:06AM | |
| Airlines everywhere are struggling with the current price of oil, but the solution to their problems should not lie in an anti-competitive merger which will inevitably lead to less competition and higher fares. | |
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Martin, London 21 June 2010, 11:12AM | |
| Branson wrote/pleaded to Obama to stop the merger stating that BA/AA would have a combination of high frequencies and a transatlantic network that could not be replicated by any other airline/alliance, and which would make it impossible for other carriers to compete for time-sensitive corporate or business travellers. | |
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Barry Graham 22 June 2010, 10:46AM | |
| As a BA and AA customer I think this proposed alliance is the best thing for me and other OneWorld customers. I hope that nobody listens to Branson because I really want this alliance to happen. | |
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Jane M, Sutton 23 June 2010, 10:23AM | |
| BA should not be given the chance to merge with AA. Consumers would be unprotected by the very regulators who are there to shield them from the monopolistic BA tendencies we have sadly seen in the past. | |
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Stuart, Leeds 24 June 2010, 03:39PM | |
| Virgin Atlantic has always been a superior service to BA. They have built up a substantial customer base and I cannot see the BA/AA merger having a detrimental effect on them. | |
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Andrew Hall, London 30 June 2010, 01:54PM | |
| Virgin Atlanic will evolve and shape with the times like it has always done, if this means merging/selling out to other rivals it will be done. I just hope that they continue providing their excellent 1st rate service in the future. | |
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Tim Kelly, Nottingham 12 July 2010, 10:49AM | |
| Mr. Branson has recently quoted that not all consolidation is good, citing the alliance between British Airways and American Airlines, both competitors to Virgin Atlantic, as “one consolidation too many.”“The alternative sometimes is letting some of these legacy carriers go bust,” he said. “And I think that would be good for competition.” | |
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Stuart Reese, London 13 July 2010, 04:47PM | |
| Virgin Atlantic are reportedly still making decent profits and winning market share from its competitors despite being in the toughest trading environment ever. They are offering some of the lowest fares ever, consumers have never had it so good for so long. | |
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Graham, Cambridge 14 July 2010, 01:24PM | |
| I hope Virgin Atlantic will continue to compete to win passenger and corporate business despite this massively uneven playing field they are forced to compete on with BA. | |
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| I am very worried about the whole process of consolidation. It must damage competition and will push up prices. I do appreciate that air travel is bad for the environment and the green lobby would want us to travel much less frequently. I also accept that globalisation has probably gone too far and we waste money and resources moving people and goods around the world. However, cheap ravel has been good for the average person - no frills airlines like Ryanair and EasyJet have opened up Europe. Consolidation will change this and I think it will be for the worse. | |
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