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Puckinflight

An all things aviation blog

Tag Archives: Virgin Atlantic

With an Airlines 101 post, china post, and a FAA post I just don’t have time to publish about each piece of news that came out this morning. Where sometimes you famine, today you feast.

Boeing announced they are going to cut up to twenty percent of their staff at the Charleston SC 787 plant. While Boeing did not announce a specific number 20 percent would be 1200 jobs. Best of luck to all those affected by the cuts.

http://www.topnews.in/boeing-cut-hundreds-jobs-south-carolina-dreamliner-plant-2373871

Virgin Atlantic published their domestic schedule to start in April. London-Aberdeen will be three daily, London-Manchester will be three daily moving to four daily, and London-Edinburgh will be three daily moving to six times daily.

http://airlineroute.net/2013/03/01/vs-domestic-s13

Marketwatch.com published an article on Airline fees. I am not sure their math adds up, but I still find it funny that United Airlines maxes out at $666.00.

http://www.marketwatch.com/story/airlines-that-charge-the-most-in-fees-2013-03-01

Finally, from the Travel Goods association in Las Vegas, we have a pillow blindfold combination that looks quite functional even though it looks like it came out of an alternative lifestyle store.

http://www.thetravelhalo.com/

Happy Travels!

colpuck

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Delta has bought the 49% stake in Virgin previously held by Singapore Airlines. My previous posts have gone into more detail on this issue. What we see in the next few months is Virgin moving into Sky Team and the termination of their relationship with US Airways.

This will increase pressure on UA Airways, who is now in last place of the lucrative flights to Heathrow, to merge with AA. I suspect US to sweeten its big for American Airlines. the sweeter the bid, the more like American the final airline will look like.

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Virgin Atlantic recently acquired the short haul slots of LHR that belonged to bmi that BA had to divest as part of their takeover of bmi. Even more interesting is that Delta Airlines has tendered an offer to Singapore Airlines for their 49% of Virgin Atlantic according to the Sunday Times. Previously reported on and commented on by this blog was that Virgin was in talks with an unnamed airline looking at admission into one of the “big-three” airline alliances. Now Delta Airline is looking at acquiring a minority stake in Virgin.

According to standard corporate governance laws, the stake while not controlling would allow Delta to change at least some of Virgin’s board of directors. This may, and I emphasize may, get Virgin to make a move into Sky Team. The effects of this move would be wide reaching for Airline Alliances, British, and American aviation.

Alliances.

A Virgin move in to Skyteam extends the alliance into untouched US-LHR transatlantic markets and UK-Caribbean routs. It also gives Sky Team an incredibly strong presence in Northwest Europe with hubs in LHR, CDG, and AMS. While LHR will continue to be a OneWorld hub with BA, Star Alliance will see reduced influence in those markets.

British Aviation.

This purchase if it happens will see the opening of a hub in LHR to rival that of BA. I along with others have been suggesting a bmi-VA merger as a way to create an alternative to BA. Apparently, Virgin has adopted this idea. While VA doesn’t get the bmi operation they do get some of their slots and none of their problems all of which were inherited by BA. This was a very shrewd move by Virgin leadership. While I think the entire operation could have been beneficial to Virgin, their leadership thinks that the lack of operations and slots is made up for by the lack of problems.

American Aviation.

Here’s what people haven’t considered. Delta taking a stake in Virgin will force US Airways to merge with AA and move the new airline in One World. US Airways is currently the only legacy domestic partner with Virgin. If Delta moves on Virgin, Delta/Skyteam will force Virgin to end that relationship and restart with Delta. Now US Airways gets some revenue from VA-US connections in the US and additional access to LHR through codesharing.

The United Airlines / US Airways relationship has never really been more than pro-forma. The rumor was that US Airways was threatened with expulsion from Star Alliance if they did not allow Continental Airlines (now merged into United Airlines) into Star Alliance. While I am not privy to Star Alliance admission rules, this rumor seems to suggest that each airline has some sort of veto over admission of new members. In light of this relationshi, and the reduction of access to LHR through the Virgin partnership it will make it more likely that US Airways will cut a merger deal with American, exit Star Alliance, and enter One World.

See the whole article here.

http://www.thesundaytimes.co.uk/sto/business/Industry/article1170291.ece

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Bloomberg is reporting that Sir Richard Branson is in talks to have Virgin Atlantic (VS) join an airline alliance. In order to keep this from being a “who done it” post, right out I’ll tell you that I think it is going to be SkyTeam, though not for the reasons in the Bloomberg article. Virgin Atlantic is owned mostly by the Virgin Group with a 49% stake owned by Singapore Airlines. Operating out of London Heathrow, London Gatwick, and Manchester Virgin is a long haul airline operating flights all over the world. Looking at each alliance, we’ll evaluate why it does and doesn’t work.

Star Alliance

Why it works

With the IAG (BA) takeover of bmi, Star Alliance is basically cut of the London market except as an origin and destination option. Bringing Virgin into Star Alliance gives the alliance back the footprint that was lost with bmi’s exit. Also Singapore airlines, one of the original members of Star Alliance, owns 49% of Virgin. This allows Singapore to enhance revenue as well as increase influence over Star Alliance.

Why it doesn’t work.

Adding Virgin into Star Alliance doesn’t really create the opportunities for connections that there would be on paper. Virgin being a long-haul carrier there are no other connections except to other long-haul routes. Frankly the Lufthansa group already has those connections covered through Frankfurt and other European hubs. Also if you look at Virgin’s footprint in the United States, they already fly to all of the markets covered by United, SFO, LAX, IAD, NYC/EWR, and seasonally ORD. This forces Star Alliance to divide the same Trans-Atlantic pie into smaller pieces. I don’t think United is going to go for this. This reason more than anything else keeps them out of Star Alliance.

OneWorld

Why it Works

It creates super hub in LHR that would be near impossible to break. By far OneWorld would have the vast majority of LHR slots. Joining One World also helps fill in the gaps in coverage out of LHR.

Why it doesn’t work

It will be a very cold day before Sir Richard Branson joins anything that has to do with British Airways. He hates British Airways in the way Apple hates Samsung, it’s very personal. Part of Sir Richard Branson’s management style is his personality which complements his business savy. One only has to look at their adverts to see that. http://www.youtube.com/watch?v=Hbib-A6NpW8 There is no way his personality would allow him to join up British Airways. Finally, there is no way this clears British anti-trust.

SkyTeam

Why it works

First, SkyTeam gains London access out of a bunch of North American and Caribbean markets that have belonged to Star and OneWorld. Next, SkyTeam gains another airline that the alliance desperately needs. SkyTeam would with the exception of British Airways have a lock down on that corner of Europe, Paris, London, and Amsterdam as all three hubs are within 250 miles of each other. However, unlike if Virgin joins OneWorld, the lockdown is more ethereal and more likely to pass whatever EU anti-trust tests there are.

Why it doesn’t work.

Most if not all of the markets into LHR are covered by Air France/KLM. Adding Heathrow as a hub just means that there are now three SkyTeam hubs within 250 miles of each other. Much like if Virgin joins Star Alliance, these three hubs will split the same pie three ways, instead of two.

Of the three choices, I think SkyTeam is the best fit for Virgin. United will probably flight to keep Virgin out of Star Alliance and Branson will kill to keep Virgin out of OneWorld. Skyteam wins almost by default. The argument against SkyTeam isn’t that strong. What traffic that Virgin has that O/D’s at LHR will not be affected by AF/KLM. Where Virgin and AF/KLM compete in the long-haul connecting market the airlines can decide to offer similar flights at different times in order to present more flight options within SkyTeam.

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According to the BBC, Virgin Atlantic has filed an appeal with the European Commission to block the sale of bmi to IAG  (British Airways). Now the EC has already approved the sale, and Virgin Atlantic has already committed to bidding on all of the Heathrow slots that BA will be required to divest as a result of the sale.

My question is, will this sale EVER  go through?

What do you think, leave you comments below.

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