Virgin Atlantic
Virgin Atlantic, a trading name of Virgin Atlantic Airways Limited and Virgin Atlantic International Limited, is a British airline with its head office in Crawley, England. The airline was established in 1984 as British Atlantic Airways, and was originally planned by its co-founders Randolph Fields and Alan Hellary to fly between London and the Falkland Islands. Soon after changing the name to Virgin Atlantic Airways, Fields sold his shares in the company after disagreements with Sir Richard Branson over the management of the company. The maiden flight from Gatwick Airport to Newark Liberty International Airport took place on 22 June 1984.
The airline along with Virgin Holidays is controlled by a holding company, Virgin Atlantic Limited, which is 51% owned by the Virgin Group and 49% by Delta Air Lines. It is administratively separate from other Virgin-branded airlines. Virgin Atlantic Airways Limited and Virgin Atlantic International Limited both hold Civil Aviation Authority (CAA) Type A Operating Licences (AOC numbers 534[5] and 2435 respectively),[5] both of which permit these airlines, operating as Virgin Atlantic Airways, to carry passengers, cargo and mail on aircraft with 20 or more seats.[6]
Virgin Atlantic uses a mixed fleet of Airbus and Boeing wide-body aircraft and operates to destinations in North America, the Caribbean, Africa, the Middle East and Asia from its main bases in London (Heathrow and Gatwick), and its secondary base at Manchester. The airline also operates seasonal flights from Glasgow and Belfast. Virgin Atlantic aircraft consist of three cabins: Economy, Premium (formerly Premium economy)[7] and Upper Class (business).
In July 2017, Virgin Atlantic announced its intention to form a joint venture with Air France–KLM, but in December 2019, it was announced that the joint venture would not include a stake in Virgin Atlantic
Virgin Atlantic has its origins in a joint endeavour by Randolph Fields, an American-born lawyer, and Alan Hellary, a former chief pilot for British private airline Laker Airways. Following the collapse of Laker Airways in 1982, Field and Hellary decided to establish a new company, initially named British Atlantic Airways, as a successor.[9] Reportedly, Fields had formed a concept for an airline that would operate between London and the Falkland Islands during June 1982, when the Falklands War had just finished.[10] Seeking out expertise in the field, Fields got in contact with Hellary, who had already been considering options for establishing a regular commercial service to the Falklands. In turn, Hellary was in contact with several out-of-work colleagues from the collapse of Laker Airways; as such, the pair decided to refine their ambitions.
However, it was soon determined that the short runway at Port Stanley Airport, and the time it would take to improve it, would render a route to the Falklands commercially unviable, thus the idea of such a service was dropped. In its place, Hellary and Fields commenced efforts to secure a licence to operate a route Gatwick Airport, London and John F. Kennedy International Airport, New York City. During May 1983, a three-day inquiry was conducted, which chose to reject the application following objections from British Airways, British Caledonian and BAA.
Hellary and Fields then applied for a licence between Gatwick and Newark, New Jersey, using a 380-seat McDonnell Douglas DC-10.[9] However, faced with the prospect of direct competition from rival operator PEOPLExpress, a post-deregulation "no frills" discount airline based at Newark, they decided to secure more funding before proceeding. Fields met British entrepreneur Richard Branson at a party in London during which he proposed a business partnership. After protracted and testy negotiations, Fields agreed to a reduced stake of 25% in the airline (which was renamed Virgin Atlantic) and became its first chairman. Following disagreements over operations, Fields agreed to be bought out for an initial sum of £1 million with further payment on Virgin's first dividend. As a result of a High Court action, this additional payment was received shortly before Fields' death in 1997.
Formative years
On 22 June 1984, Virgin Atlantic operated its inaugural scheduled service, flown between Gatwick and Newark using a leased Boeing 747-200 (registration G-VIRG), christened Maiden Voyager,[9] which had been formerly operated by Aerolíneas Argentinas. From the onset, its activities were augmented by leveraging existing Virgin Group resources, such as tickets being sold at Virgin Megastores record shops.[11]
Part of Richard Branson's declared approach to business is to either succeed within the first year or exit the market; this ethos includes a one-year limit being expressed upon everything associated with starting up operations.[12] Virgin Atlantic became profitable within the first 12 months, aided by sister company Virgin Records' ability to finance the lease of a secondhand Boeing 747. The firm had timed its operations to take advantage of a full summer, from June to September, which was typically the most profitable period of the year.
In November 1984 the airline launched a service between Gatwick Airport and Maastricht Aachen Airport in the Netherlands using a chartered BAC One-Eleven.[13]
In 1986 the airline added another Boeing 747 to its fleet and started a scheduled route from Gatwick to Miami. Additional aircraft were quickly acquired and new routes launched from Gatwick, such as to New York JFK in 1988, Tokyo Narita in 1989, Los Angeles in 1990, Boston in 1991, and Orlando in 1992. During 1987, Virgin Atlantic launched a service between Luton and Dublin using secondhand Viscount turboprop aircraft, but this route was withdrawn around 1990. During 1988, Club Air operated two Boeing 727 jet aircraft on behalf of Virgin; these served the Luton to Dublin route until about 1990.
Competition
Before Virgin Atlantic started operations, British Airways had been the only airline from the United Kingdom serving long-haul routes to destinations in North America, the Caribbean and the Far East since the BA-BCal merger in the late 1980s. In 1991, Virgin was given permission to operate from Heathrow following the abolition of the London Air Traffic Distribution Rules (TDRs), which had governed the distribution of traffic between Heathrow and Gatwick airports since 1978, primarily to bolster the profitability of Gatwick. Airlines without an international scheduled service from Heathrow prior to 1 April 1977 were obliged to operate from Gatwick. However, airlines that did not already operate at Heathrow were still able to begin domestic scheduled services there provided BAA, which then ran both Heathrow and Gatwick on behalf of the UK government, and the Secretary of State for Transport granted permission.
The Civil Aviation Authority also transferred two pairs of unused landing slots that British Airways held at Tokyo's Narita Airport to Virgin to let it increase its frequency between Heathrow and Tokyo from four to six weekly round trips, making it easier for Virgin to compete against British Airways. The then-chairman of BA Lord King called the CAA's decision, which the government had endorsed, "a confiscation of his company's property".[14]
In the year to October 1993, Virgin Atlantic declared a loss of £9.3m. The decision to abolish the London TDRs and to let Virgin Atlantic operate at Heathrow in competition with British Airways became the trigger for BA's so-called "dirty tricks" campaign against Virgin. During 1993, BA's public relations director, David Burnside, published an article in BA News, British Airways' internal magazine, which argued that Branson's protests against British Airways were a publicity stunt. Branson sued British Airways for libel, using the services of George Carman QC. BA settled out of court when its lawyers discovered the lengths to which the company had gone in trying to kill off Virgin. British Airways had to pay a legal bill of up to £3 million, damages to Branson of £500,000 and a further £110,000 to his airline. Branson reportedly donated the proceeds from the case to Virgin Atlantic staff.[15][16]
During the 1990s, Virgin Atlantic jets were painted with "No Way BA/AA" as a declaration of its opposition to the attempted merger between British Airways and American Airlines.[17] In 1997, following British Airways' announcement that it was to remove the Union Flag from its tailfins in favour of world images, Virgin introduced a Union Flag design on the winglets of its aircraft and changed the red dress on the Scarlet Lady on the nose of aircraft to the union flag with the tag line "Britain's Flag Carrier". This was a tongue-in-cheek challenge to BA's traditional role as the UK's flag carrier.[18]
In June 2006, US and UK competition authorities investigated alleged price fixing between Virgin Atlantic and British Airways over passenger fuel surcharges.[19] In August 2007, BA was fined £271 million by the UK Office of Fair Trading (OFT) and the US Department of Justice.[20] However, the Chief Executive of Virgin Atlantic, Steve Ridgway, was forced to admit that the company had been a party to the agreement, had been aware of the price fixing and had taken no steps whatsoever to stop the price fixing.[21] The company escaped a similar fine to that levied on British Airways only by virtue of the immunity it had earlier negotiated with the regulators.
In April 2010, a tip-off from Cathay Pacific led to the Office of Fair Trading (OFT) investigating alleged price fixing between Virgin Atlantic and Cathay Pacific on flights to Hong Kong between 2002 and 2006. Cathay Pacific received immunity from prosecution for reporting the alleged offence. A maximum fine, if found guilty, was 10% of turnover which based on the £2.5 billion in sales for the year to February 2009 would have been £250 million.[22] At the time, the OFT stressed that it should not be assumed that the parties involved had broken the law.[23] The OFT cleared both airlines in December 2012, concluding there were "no grounds for action".[24]
Recent years
In May 2014 Virgin Atlantic ended flights to Sydney. In September 2014 Virgin Atlantic announced plans to scrap flights to Tokyo, Mumbai, Vancouver and Cape Town, and to codeshare transatlantic flights with Delta Air Lines; the company was also reported to be considering axing its new Little Red domestic airline after suffering heavy losses.[25] On 6 October 2014, Virgin Atlantic confirmed that Little Red services between London and Manchester would end in March 2015, and that the Scottish routes would be terminated in September 2015.[26] Passengers used the routes from point to point as opposed to using it as a connection for longer haul Virgin Atlantic flights. The former BMI routes continued with rival airline British Airways.
In June 2015, Richard Branson admitted that Virgin Atlantic would be in "real trouble" without strategic support from Delta Air Lines. With cumulative losses between 2010 and 2013 amounting to £233 million, the future of the 30-year-old airline was in doubt.[27] In the same month, the airline announced it would cut 500 jobs to establish a more efficient management structure.[28]
In July 2017, Virgin Atlantic announced its intention to form a joint venture with Air France-KLM. Under the agreement, Air France-KLM would acquire a 31% stake in Virgin Atlantic currently held by Virgin Group for £220 million, subject to execution of definitive agreements and receipt of final shareholder, board, and regulatory approvals. Virgin Atlantic would retain its independence as a UK airline with a UK operating certificate, and would continue to fly under the Virgin brand.[29][30]
In late 2018, Virgin Atlantic were rated 83rd in the world in energy efficiency, behind many of their competitors.[31]
In 2019, Virgin Atlantic began to allow its female flight attendants to not wear makeup and have a choice to wear trousers rather than a skirt.[32]
In September 2019, it was announced Virgin Atlantic had outlined plans for a massive expansion of its network to create a "second flag carrier" in the UK, should slot reforms being considered for a larger Heathrow airport work in its favour. The airline would seek to serve 103 destinations – comprising domestic, European and long-haul services – up from the 19 points it planned to serve in 2020, all of which are long-haul. Of the 84 new destinations planned, 12 are domestic, 37 are European and 35 are international. The 35 new international destinations include Addis Ababa, Austin, Beijing, Bogotá, Buenos Aires, Cape Town, Karachi, Mexico City, Singapore, Sydney and Tokyo. Most of the routes would be new to Virgin Atlantic, although it has served several of the long-haul destinations – such as Cape Town, Karachi, Sydney, Tokyo and Vancouver – in the past.[33] It was confirmed that Flybe would have been a key part of Virgin Atlantic's plans for domestic and intra-European services, which involved the rebranding of Flybe as "Virgin Connect" from early 2020, however the plans fell through when Flybe filed for administration and ceased operations in March 2020.[34][35][36]
In December 2019, Sir Richard Branson announced that he would be scrapping the 31% sale of the airline to Air France-KLM and that Virgin Group would retain its 51% shareholding.[37]
Corporate affairs
Virgin Atlantic's head office, known as The VHQ, is located on a business park in Crawley, England, near Gatwick Airport[38] and also houses the corporate offices of Virgin Holidays.[39] The company operates several offices and call centres around the United Kingdom, including a large office in Swansea, Wales, which is a base for reservations and sales, baggage claims and tracing, 'live chat' web support and a customer relations department.
International offices are located at Atlanta, Johannesburg, Barbados, Shanghai, Hong Kong, Greater Delhi, Lagos and Dubai.[40]
Ownership
Virgin Group sold a 49% stake in the airline to Singapore Airlines in 1999 for £600 million.[41] On 14 May 2008, Singapore Airlines formally announced an invitation for offers for its Virgin Atlantic stake, and publicly acknowledged that its stake in the airline had "underperformed".[42]
In November 2010 it was reported that Virgin Atlantic had appointed Deutsche Bank to begin a strategic review of options for the airline following the tie-up between British Airways and American Airlines.[43] By February 2011 it was confirmed that SkyTeam members Air France-KLM and Delta Air Lines had appointed Goldman Sachs to advise them on a joint potential approach for Virgin Atlantic. Etihad Airways was also reported to be considering a deal,[44] and Willie Walsh, chief executive of International Airlines Group, stated that they would be interested in the airline, but only for the lucrative take-off and landing slots it holds at Heathrow Airport.[45]
On 11 December 2012, Delta Air Lines confirmed the purchase of Singapore Airlines' 49% stake in Virgin Atlantic for £224 million, with plans to develop a transatlantic joint venture. Regulatory approval from the United States and European Union was granted on 20 June 2013,[46] and the purchase was completed on 24 June.[47] In December 2012, International Airlines Group CEO, Willie Walsh, suggested that the loss-making company would be history within five years. "I can't see Delta wanting to operate the Virgin brand because if they do what does that say about the Delta brand? I just don't see that the guy [Branson] has anything that stands out in terms of what he has achieved in the industry."[48]
In July 2017, Virgin Group agreed to sell a 31% stake in the airline to Air France-KLM for £220 million, leaving it with a 20% holding.[30] The deal fell through in late 2019.[49]
Business trends
The key trends for Virgin Atlantic are shown below (from 2014 onwards, figures are for year ending December; earlier figures are for year ending February, and exclude Virgin Nigeria operations 2005–2008):
Virgin Atlantic aircraft operate with a three-class cabin configuration: Economy, Premium (formerly Premium economy),[7] and Upper Class - the business class product. Premium has a separate check-in area, priority boarding and a wider seat with more legroom. Upper Class features a seat that converts into a fully flat bed and access to chauffeur drive.[63] Virgin Atlantic was the first airline to offer personal entertainment for all passengers in all classes.[citation needed]
The airline's frequent-flyer program is styled 'the Flying Club'.
Virgin Atlantic operates 10 lounges worldwide. It has nine 'Clubhouse' locations – London (Heathrow and Gatwick), New York-JFK, Newark, Boston, Washington D. C., San Francisco, Los Angeles and Johannesburg.[64] It also maintains a Revivals arrival lounge in London Heathrow. They are accessible for passengers travelling in Upper Class and Flying Club Gold tier members.
Little Red
British Midland International provided domestic and European feeder traffic into Heathrow Airport in partnership with Virgin[65] until it was purchased by British Airways' parent company International Airlines Group in 2011. The Lufthansa-owned airline had faced heavy annual losses of more than £100 million. Under the terms of the takeover, IAG had to relinquish some former BMI domestic slots at Heathrow. Virgin Atlantic purchased enough slots in 2012 to enable it to launch a domestic service on 31 March 2013, under the Little Red brand, operating a total of 12 daily services from London to Aberdeen (three), Edinburgh (six), and Manchester (three).[66] The airline wet-leased four Airbus Airbus A320-200s from Aer Lingus, operating with Virgin Atlantic livery, under a three-year contract.[67][68]
In September 2014, it was reported that Virgin was considering closing its domestic brand after suffering heavy losses,[69] with Civil Aviation Authority figures confirming an average seat occupancy level of just 37.6% in 2013.[25] The 12 daily pairs of take-off and landing slots at Heathrow cannot be sold to be used for long-haul routes.[70]
On 6 October 2014, Virgin confirmed that the Little Red service would cease; flights to Manchester ended on 28 March 2015 and flights to Edinburgh and Aberdeen ended on 26 September 2015.[71]
Virgin Atlantic International Limited
On 13 April 2015, Virgin Atlantic incorporated a new subsidiary – Virgin Atlantic International Limited (VAIL).[72] In November 2015, VAIL obtained its own Air Operators Certificate and Operating Licence, and commenced operations with two former Virgin Atlantic Airways Limited operated Airbus A330-300 aircraft taking over routes previously operated by Virgin Atlantic Limited between London Gatwick and Barbados, St Lucia, Antigua, Grenada and Tobago.[73] These flights are operated on behalf of Virgin Atlantic.[74]
Upon incorporation as an AOC holder, the majority of Virgin Atlantic's landing slots at London Heathrow Airport were transferred to VAIL, allowing Virgin to access the value of the carriers' slots by 'mortgaging' them through open investment from capital markets, the first time in Europe a company has used airport take-off and landing slots to generate money in this way.[75][76]
Flybe takeover bid
On 11 January 2019, Virgin Atlantic formed the Connect Airways consortium with Stobart Aviation and Cyrus Capital, to make a takeover bid for Flybe.[77][78] The deal would see the consortium combine Flybe and Stobart Air with Virgin Atlantic to create an integrated carrier operating under the Virgin Atlantic brand.[79] Flybe and Stobart Air would however retain their own Air Operator Certificates.[80] On 15 January 2019, Connect Airways announced an increased offer, which Flybe's board accepted.[81] On 21 February 2019, the Flybe Group confirmed that its operating assets, including the airline and the website, had indeed been transferred to Connect Airways, despite a last-minute rival bid.[82] However, despite the investment of £135 million from Connect Airways into Flybe, the airline filed for administration and ceased operations with immediate effect in March 2020, following reduced demand that Virgin Atlantic attributed to the 2019–20 coronavirus outbreak and the UK government failing to grant a £100 million loan.
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