Virgin Domestic
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Some years ago there was a really great service from Manchester to London City by VLM using Fokker 50s. When Mr Bransons train service started in earnest VLM pulled off the route. I suspect that they couldn't compete with the half-hour frequency and the lack of security screening required by the train operators.
I wonder what has changed.
I wonder what has changed.
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Virgin on UK domestic
Sorry to be negative about new initiatives or airlines spreading their wings into new markets; however, this in my view is Virgin moving its focus away from what it is about, reminds me too eerily of bmi. As far as I can see no strategy. Long haul slots are at a premium and the can't afford to make their long haul business any smaller than it is now to enable a few daily rotations on LHR MAN or any other domestic route for that matter.
Virgin America is a super airline, they seem to differentiate from the competition with something that customers warm too, but the US is a continent in effect and much more scope for domestic flying given the distances e.g. JFK SFX or LAX.
I am not convinced that this is a good move, Virgin are in a state of flux, where it is restricted in a limited market. In my view they would be better off diversifying into markets underserved from LHR, destination where BA dont go but would like to, yes there are often restrictions but going into a short haul operation where the return will be limited doesnt strike me as a smart strategy, not to mention the cost and operational challenges (small fleet of a different aircraft, small crew for the type, cost of marketing a small domestic operation?).
EI-BUD
Virgin America is a super airline, they seem to differentiate from the competition with something that customers warm too, but the US is a continent in effect and much more scope for domestic flying given the distances e.g. JFK SFX or LAX.
I am not convinced that this is a good move, Virgin are in a state of flux, where it is restricted in a limited market. In my view they would be better off diversifying into markets underserved from LHR, destination where BA dont go but would like to, yes there are often restrictions but going into a short haul operation where the return will be limited doesnt strike me as a smart strategy, not to mention the cost and operational challenges (small fleet of a different aircraft, small crew for the type, cost of marketing a small domestic operation?).
EI-BUD
Last edited by EI-BUD; 21st Aug 2012 at 21:28.
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I can see the rationale in one sense in that Virgin has the brand and distribution strength in the UK to generate feeder traffic from the UK regions which they need to support long haul and by wet leasing they are not committing much in terms of capital risk.
However the revenue they will gain will be marginal whilst adding cost and complexity to their operation.
Seeking the IAG slot pairs for Moscow is entirely rational as the route wil yield good quality O&D traffic and feeder traffic. I would think Virgin would be better going for new medium/long haul routes that can provide both direct and connecting traffic for their existing network.
However the revenue they will gain will be marginal whilst adding cost and complexity to their operation.
Seeking the IAG slot pairs for Moscow is entirely rational as the route wil yield good quality O&D traffic and feeder traffic. I would think Virgin would be better going for new medium/long haul routes that can provide both direct and connecting traffic for their existing network.
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Omnipresent, you make valid points.
My feeling is that with bmi the airline had no clear strategy and the result was that the travelling public were not sure was it domestic were was it specialising etc. The management were not entirely sure as in the uncertain times they operated in, the didnt manage to carve a niche out.
So to avoid a situation like that, I feel that Virgin needs to ensure that is is the airline of choice for point to point ex London, LHR and LGW. If their challenge the measured impact of losing domestic traffic, the solution may be in reducing some of the long haul routes to make way for other long haul routes and tap into bigger markets, hence not be reliant on feed to domestic routes that are marginal and make the operation complex as Omnipresent puts it.
EI-BUD
My feeling is that with bmi the airline had no clear strategy and the result was that the travelling public were not sure was it domestic were was it specialising etc. The management were not entirely sure as in the uncertain times they operated in, the didnt manage to carve a niche out.
So to avoid a situation like that, I feel that Virgin needs to ensure that is is the airline of choice for point to point ex London, LHR and LGW. If their challenge the measured impact of losing domestic traffic, the solution may be in reducing some of the long haul routes to make way for other long haul routes and tap into bigger markets, hence not be reliant on feed to domestic routes that are marginal and make the operation complex as Omnipresent puts it.
EI-BUD
How much will Virgin lose on routes to Manchester, Aberdeen and Edinburgh over a 3 year period, with the proviso that if things get *really* bad, Virgin can just close the routes, re-lease out the Manchester slots to another carrier and hand the Aberdeen and Edinburgh slots back to the competition trustee ?
Assuming the losses on the routes are not too bad, how much are 7 free slot pairs at Heathrow worth, considering that after 3 years they can be used for any route including long haul rather than just domestic ?
Finally, how much of Virgin's revenue derived through bmi domestic feed ? Having customers fly to/from LHR with your main competitor is not a good idea long term.
If as seems, Virgin is wet leasing in A319s for domestic there is little capital expenditure then we just have an exercise of comparing 2 strategies with a cheap option to switch if things don't turn out.
Assuming Virgin get the free slots for next summer they would be stupid not to give this a try. Thd more free slots they get the more they will persist with domestic feed over the next three years until it turns profitable.
Assuming the losses on the routes are not too bad, how much are 7 free slot pairs at Heathrow worth, considering that after 3 years they can be used for any route including long haul rather than just domestic ?
Finally, how much of Virgin's revenue derived through bmi domestic feed ? Having customers fly to/from LHR with your main competitor is not a good idea long term.
If as seems, Virgin is wet leasing in A319s for domestic there is little capital expenditure then we just have an exercise of comparing 2 strategies with a cheap option to switch if things don't turn out.
Assuming Virgin get the free slots for next summer they would be stupid not to give this a try. Thd more free slots they get the more they will persist with domestic feed over the next three years until it turns profitable.
Last edited by davidjohnson6; 21st Aug 2012 at 22:15.
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VS domestic
Think it was likely that VS would go after the divested BA slots, otherwise they'd get nothing from the sad demise of BD. Apart from BD regional (who have had previous LHR dealings) and EI, the likes of BE, U2, etc., appear to be completely uninterested, so VS could have a clear run.
If VS are going to do ABZ and EDI, they might as well plan for a reasonable domestic network. If MAN does well, would expect (1) another west coast main line (WCML) destination, GLA, to be added, and (2) increased frequencies (subject to slot availaibility).
The loss of the WCML franchise probably just brought the announcement time forward, this must have been planned for a while.
Quote: "Virgin Domestic. Call sign Vee Dee? Perhaps not eh?"
Oh very good! No it will be the same: "Virgin Atlantic" VS, just like BA is, and BD was, the same on international and domestic.
Quote: "I wonder how Virgin think they will operate at Heathrow; as I understand it T3 has no facilities for domestic arrivals, even from coaching stands, so they will need to arrive at T1 and do a terminal transfer for any connecting passengers."
Expect this is tied in with VS's move to LHR2, now that BD will not be there. Having a domestic operation makes their case to move there stronger. They will be able to feed the Star Alliance longhaul as well as their own, and it is possible that there is a plan for VS to join the Star Alliance later on (?).
Quote: "I dont understand why Virgin dont just sell their LHR slots to someone (other than BA), and move lock stock and barrel to become an anchor tenant at LGW.
They could have far more flexibility there, lower costs plus LGW is attracting more and more long haul traffic and Im sure would snap up the idea to turn LGW into a genuine hub airport to compete with LHR. If they really want to compete with BA then that should do the trick?! "
Will never happen! They will never leave the world's largest international hub and third largest overall, it would be suicide! VS saved their bacon by shifting to LHR in the 1980s, had they not done so, they would probably have gone the same way as BUA, BCal and Laker: belly up. There isn't sufficient connectivity at LGW, it is not a hub airport. BTW there is already an "anchor tenant" at LGW, it is U2.
Quote: "Yields collapse and LGW. Put it another way, when VS moved LGW-US round the M25 yields went up by enough % points to be more than worth the move. Profits would collapse and losses grow if they walked away from LHR. Besides they have a massive investment in their LHR base."
Exactly.
If VS are going to do ABZ and EDI, they might as well plan for a reasonable domestic network. If MAN does well, would expect (1) another west coast main line (WCML) destination, GLA, to be added, and (2) increased frequencies (subject to slot availaibility).
The loss of the WCML franchise probably just brought the announcement time forward, this must have been planned for a while.
Quote: "Virgin Domestic. Call sign Vee Dee? Perhaps not eh?"
Oh very good! No it will be the same: "Virgin Atlantic" VS, just like BA is, and BD was, the same on international and domestic.
Quote: "I wonder how Virgin think they will operate at Heathrow; as I understand it T3 has no facilities for domestic arrivals, even from coaching stands, so they will need to arrive at T1 and do a terminal transfer for any connecting passengers."
Expect this is tied in with VS's move to LHR2, now that BD will not be there. Having a domestic operation makes their case to move there stronger. They will be able to feed the Star Alliance longhaul as well as their own, and it is possible that there is a plan for VS to join the Star Alliance later on (?).
Quote: "I dont understand why Virgin dont just sell their LHR slots to someone (other than BA), and move lock stock and barrel to become an anchor tenant at LGW.
They could have far more flexibility there, lower costs plus LGW is attracting more and more long haul traffic and Im sure would snap up the idea to turn LGW into a genuine hub airport to compete with LHR. If they really want to compete with BA then that should do the trick?! "
Will never happen! They will never leave the world's largest international hub and third largest overall, it would be suicide! VS saved their bacon by shifting to LHR in the 1980s, had they not done so, they would probably have gone the same way as BUA, BCal and Laker: belly up. There isn't sufficient connectivity at LGW, it is not a hub airport. BTW there is already an "anchor tenant" at LGW, it is U2.
Quote: "Yields collapse and LGW. Put it another way, when VS moved LGW-US round the M25 yields went up by enough % points to be more than worth the move. Profits would collapse and losses grow if they walked away from LHR. Besides they have a massive investment in their LHR base."
Exactly.
Last edited by Fairdealfrank; 22nd Aug 2012 at 00:11.
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PROFITS?
What profits Frank? The airline lost 80 million last year. Only going to operate the domestic routes until they can use them for long haul citing continuous losses and then transferring the remaining Gatwick services at the same time so by saving even more costs. Just my two pennyworth.
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Didn't Virgin already do this route nine or ten years ago?
I am sure Flightline used to run the service on behalf of Virgin for quite a while on a 146, as a means of keeping slots at LHR.
I am sure Flightline used to run the service on behalf of Virgin for quite a while on a 146, as a means of keeping slots at LHR.
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Well I wish Virgin all the best 
But could we see BFS being served ? As it has no LHR connection at the moment and that's a very important route up for grabs.
And what about City of Derry ? It has no LHR connection all it has is a
Stansted route with FR ?
But could we see BFS being served ? As it has no LHR connection at the moment and that's a very important route up for grabs.
And what about City of Derry ? It has no LHR connection all it has is a
Stansted route with FR ?
With Heathrow slots so constrained and Belfast City already (or soon to be) served by BA + Aer Lingus, I can think of other places in the UK more likely to get a route to Heathrow than Derry...
I've tried to put together various 2 + 2 together here.
Part of the deal for BA taking over BMI is that a number of slots will be given to another carrier to provide a competitive service on routes to Edinburgh and Aberdeen. However, among the conditions is that the slots will not be given to a carrier who already has slots of their own leased out and therefore they are under-using what they already have.
Virgin has had slots leased out to other carriers and would therefore be ineligible to apply. However the lease came up for expiry and Virgin are taking them back. That means they are now OK to apply for the Scottish slots. What they need is a slot-sitter for a while. Manchester is about the shortest route that looks remotely sensible so go for that - for now.
Having done this, they are now eligible to apply for the Scottish route slot transfer. Apply for and get those - doesn't really seem to be any other meaningful interest. These slots are only protected to the Edinburgh/Aberdeen routes for three years, after that you can do what you like with them.
So, Virgin will have somewhat infrequent (compared to BA) services to Manchester, Edinburgh and Aberdeen, ticking over and losing, well, not a lot we hope. In three years time they can dump all these domestic routes and do what they like with them. They can start their own services, doing what their business does properly, namely long-haul, or they can lease them out again once the time lock expires.
Look out for the press release around the end of 2015 saying they are "reluctantly" withdrawing from domestic routes due to [choose one of] high APD / their own environmental concerns about domestic flights / desire to mount direct services from Manchester etc with the 787. Goodness, the draft of this press release is probably already written and sat in Ricky's safe for a few years.
Part of the deal for BA taking over BMI is that a number of slots will be given to another carrier to provide a competitive service on routes to Edinburgh and Aberdeen. However, among the conditions is that the slots will not be given to a carrier who already has slots of their own leased out and therefore they are under-using what they already have.
Virgin has had slots leased out to other carriers and would therefore be ineligible to apply. However the lease came up for expiry and Virgin are taking them back. That means they are now OK to apply for the Scottish slots. What they need is a slot-sitter for a while. Manchester is about the shortest route that looks remotely sensible so go for that - for now.
Having done this, they are now eligible to apply for the Scottish route slot transfer. Apply for and get those - doesn't really seem to be any other meaningful interest. These slots are only protected to the Edinburgh/Aberdeen routes for three years, after that you can do what you like with them.
So, Virgin will have somewhat infrequent (compared to BA) services to Manchester, Edinburgh and Aberdeen, ticking over and losing, well, not a lot we hope. In three years time they can dump all these domestic routes and do what they like with them. They can start their own services, doing what their business does properly, namely long-haul, or they can lease them out again once the time lock expires.
Look out for the press release around the end of 2015 saying they are "reluctantly" withdrawing from domestic routes due to [choose one of] high APD / their own environmental concerns about domestic flights / desire to mount direct services from Manchester etc with the 787. Goodness, the draft of this press release is probably already written and sat in Ricky's safe for a few years.
I think there's another element driving VS. As long as they have to put their passengers on BA domestics there is a commercial issue. BA will lift the ticket coupon at Manchester and that will give them visibility of the fare ladder routing etc. With their own flights they can keep that data in house. It also extends their reach for Upper Class because they will be able to offer limo service to a large tranche of the NW plus most of the populated bits of Scotland (even Glasgow).
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Sorry Frank where do you get the idea of more long haul flights from LGW. Me thinks it is the other way - less. The airlines operating long haul flights only use LGW because they cannot get slots at LHR. When they become available they move across. LGW in my opinion will NEVER be able to compete with LHR, Paris, Amsterdam etc on long haul destinations it will remain a short/medium operation - nothing wrong with that - with a few long haul leisure destinations and donīt let GIP brainwash in telling you otherwise.
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Aer Lingus are acquiring additional A319s early next year. Coincidence? I
think not...
Of the 2 coming, I would put money on it that BHD gets one. Separately, AerLingus have expressed an interested in aquiring LHR EDI slots in their own rite.
We shall have to wait and see, I cant see Aer Lingus getting that close to Virgin. However, that said, I cant actually see what other airlines that would be an immediate match who have 319s and would fly for Virgin. They may just operate themselves rather than going to somebody like say Aer Lingus.
EI-BUD