A confident Virgin Atlantic to double down on Indian aviation market

Alex Mcewan, Virgin Atlantic Country Manager-India
Ever since he entered the global aviation arena, Virgin Atlantic’s founder Richard Branson has had a larger than life image. His flair for words, charm and way with women have inspired many including Air Asia Berhard’s Tony Fernandes and erstwhile Kingfisher Airlines Vijay Mallaya to emulate him with rather mixed results. But no one has really managed to be “another Richard Branson”.

It therefore comes as no surprise that despite being a very small, niche airline (with between 35-40 aircraft) Virgin Atlantic grabs far from attention globally than any carrier of its size manages. In December 2019 on Branson’s last visit to India, he made a huge splash as usual in the media despite the fact that his airline is one of the smaller ones operating in and out of the country. The airline has a far higher brand recall than most rivals its size.

This has been the USP of the airline globally. Virgin Atlantic - with 49% owned by Delta and 51% by Branson - has had a curious trajectory. The airline has remained small and boutique with around 37 Airbus and Boeing aircraft since it started in 1984. It primarily operates as a full service purely long haul carrier out of London with 70% of its network is focussed on the transAtlantic routes including New York, LA, San Francisco, Boston, Washington, Miami, Orlando among other American cities, and 30 per cent of its capacity connects London to the rest of the world - major cities in Africa, South East Asia including India, Middle East and the Far East (Shanghai and Hong Kong). 

India - where it started operating in 2000 -  however is Virgin’s third largest market with decent loads, revenues and brand recall. The airline stopped flights from India as a result of the pandemic but has recently restarted and intends to come back with more vigour than ever. Virgin Atlantic’s country head for India Alex McEwan spoke to Anjuli Bhargava on the impact of pandemic on global aviation, on Virgin Atlantic and how he anticipates the future to shape up. Excerpts from a chat :

Q: Why has Virgin Atlantic remained so niche for so many years ?

A: Two reasons. The short haul European market is very competitive and price is a key factor. Many airlines with only short haul have gone out of business in Europe. Second, Heathrow is a very constrained airport and slots are expensive. So the kind of expansions you see here are simply not possible. This has put a cap on our own growth but as a result we have partnerships and code shares with other airlines to offer our passengers a wider network within Europe without taking the risk of operating the flights directly. When Heathrow has a third runway and more capacity, this may change. So far, we are a purely full service, long haul airline that focuses on the quality of service while running a profitable business. We have very new and efficient airplanes. This has worked well as a strategy for us so far. We are not the largest airline in the world but we fly to the most significant destinations across.

Q: How is Virgin Atlantic coping with this crisis?

A: We have come up with a 1.2 billion pound restructuring plan which has various components. One of the biggest has been cost reduction and that has been done by cutting staff numbers in two phases from almost 10,000 pre-pandemic to around 5500 now. We have downsized in keeping with our current operations. In addition, we are retiring some of our older, less efficient  aircraft. Some aircraft orders are being delayed. The new planes will be more fuel efficient and help lower costs. There’s a loan component too in the restructuring plan that will help tide over this time. We don’t have new shareholders.  The pandemic has forced us to think about sustainability more comprehensively. Going forward, we will have a very young, fuel efficient fleet.

Crisis in the past have changed the way people travel completely. We expect India to have a quicker V shaped recovery. We also see far more demand for flexibility - making changes in tickets and plans, free of charge, something we offer already. All airlines will focus on sustainability and four engine aircraft will be replaced by two engine planes, which allow for lower fuel bills. Passengers may choose to avoid connections and prefer direct flights particularly in the next 12 months. 

Q: Since all flights stopped, how has Virgin fared in India ?

A:  Prior to the pandemic, India was our third largest market accounting for between  5-10 percent of our total revenue. We’ve also had pretty high load factors typically over 85-90 per cent especially after Jet shut down. But India load factors have always been higher than average for our network. We’ve also seen a greater willingness and ability to pay from India in the last two years in particular, so fares have been robust. The propensity to travel amongst Indians is going up as is their willingness to pay.

Pre-pandemic, we had daily flights from Delhi and Mumbai to London, which of course stopped. But, like others during the pandemic, we restarted flights from Delhi and Mumbai to London under the air bubble in September although load factors are much lower. We are now starting flights to Manchester.  During the shutdown, we have focussed on cargo. Global supply chains have been impacted severely so the average price charged for cargo has gone up. Prior to the pandemic we barely carried any cargo : 90 percent passengers and 10 percent of our revenue was from cargo. But currently, almost 50 per cent of our revenue is from cargo.

Q: What do you think of the increased competition that you and others will face from the Indian players  ? Many in India’s aviation sector  feel Vistara and SpiceJet’s move of adding London to their destination list in the midst of the pandemic is suicidal….

A: Both Vistara and SpiceJet have talked about operating to London for some time now. This may have been a good time for them to get a foothold and access to London. A flight to London although expensive may form a small part of their overall costs, since these are large and growing airlines. It may be a risk worth taking. 

Competition is part of Virgin’s fabric : we came into existence to compete with British Airways! So, we are always happy with more of it.  But as I see it we have a few advantages : we have a vast network of further connectivity to our fliers from India, be it to Europe, the US or even Latin America. The new entrants don’t have this as of now. We are also known in the Indian market since we have been here almost 20 years so I’d say we have a committed clientele already.  

Besides starting new destinations like Manchester, we have introduced some innovative schemes with our frequent flier where you can earn points even when you burn points. Also, points earned will never expire. We also have a Covid insurance cover for our fliers as part of the ticker price, not an add-on. Not all our competitors can offer all this.

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