Virtual Airline

[davidjohnson6]

I keep reading about companies being virtual airlines
Are there any countries in Europe where thid is formally recognised in law as being distinct from a travel agency or, an airline with an AOC
My understanding is that the term "virtual airline" is just a fancy way of saying "travel agency" but wondered if someone on here can explain...

[Alsacienne]

Might you kindly care to name some examples?

[goldeneye]

Wikipedia has a page all about them.

https://en.m.wikipedia.org/wiki/Virtual_airline_(economics)

[davidjohnson6]

Many thanks for the posts. To clarify, I'm talking about companies that are described as being virtual airlines, which take money in return for services, and which do not possess an AOC

[PAXboy]

In the UK a similar kind of set up is (to pick one of many) Tesco Mobile Phone Service.

They rent capacity on a mobile network at wholesale rates and then get to sell and control customers onto that network. They present themselves AS a mobile phone network but they do not own one. They have their own rules and contracts with their customers - that can vary enormously with other companies who ALSO rent capacity on the actual network, as well as the actual network owner themself.

Numerous companies do this on numerous networks. The parent networks get guaranteed income without the hassle of having to manage those individual customers.

[Peter47]

There is a school of thought that airlines should outsource their "non core" activities i.e. not the flying & network planning - things like catering, ground handling and engineering - you see this with the LCCs and increasingly network carriers. When Swissair went bust it sold of its ground handling and engineering (although a little of the latter has since been insourced). We could all produce a long list of airlines that have sold off their ground handling arms. You could however go further. National Express at one stage owned five or six coaches in order to hold an operator licence and everything else was outsourced to local operators. You see this in the airline industry with franchise operators with, for example. U.S. carriers frequently changing their franchise partners. What if we do go further go further. Lets say United were to become an marketing company operating a few aircraft for charter operations and outsourcing everything else. Think of the 1970s supplemental carriers (who operated some large aircraft) competing to serve routes for the majors. A strike over scope clauses wouldn't matter as its own staff operated so little. This could result in lower staff costs and indeed commoditisation as we see with ground handling. I'm certainly not advocating this & wouldn't like it if I were a member of staff so affected. You can see situations as we had at Alaska Airlines where they threatened to outsource ground handling if the union did not make concessions. They didn't and Alaska Airlines did so many ground handlers lost their job. Obviously there are more protections in the Europe - the UK for example has TUPE but a new carrier could do it. I've not thought of all the implictions, there will be many (for example to seniority lists).

[BirdmanBerry]

Manx2, later Citywing, were a virtual airline as charged for the services and leased from Van Air which I believe is why it all fell down when the AOC was withdrawn/they stopped trading themselves.

[BA318]

Norwegian regional carrier Flynonstop were a virtual airline. The flights were operated by Denim Air. https://en.m.wikipedia.org/wiki/FlyNonstop

[PAXboy]

There are always pros and cons of out-sourcing, mainly depending on whether you are buying or selling!

The downside is loss of control. The seller will tell you that you have the same control (especially if your staff are moving over to the new company) but that is not always the case. If you are not directly paying someone's wages you do not have their full attention.

If the maintenance company says that 'Jeff' is now to be allocated to another company - you have to have a lot of clout to stop them. If Jeff is brillant and all know that he is, then the company may want to send him to another client where things are not going well and they want to save the contract.

In the UK about 15 or 18 years ago, there was a strike and fuel tanker drivers (supplying high street fuel stations) joined the strike. This was illegal and the boss of the outfit was upset to see his branded tankers on the evening TV news. He rang the Ops Mgr and informed him that this would change! I gather it took over 48 hours because the truck delivery had been outsourced to an Italian company. In turn THEY had sub-let a contract back to the UK for day to day mgmt.

As you can tell, I am not in favour. Primarily because the staff get a raw deal. They want to keep their jobs but their terms and conditions HAVE to go down (and some are made redundant) in order for the out-sourcing company to get their slice of the pie.

One of the reasons why this was fashionable is that, in the late 80s and 90s, there was a 'metric' of how many staff you had to bring in the revenue. If you move 10% of your staff (say) off the books - that number looks better and the boys at top table find their trough just got deeper. You do not here that metric very often now, because there are other numbers that are now fashionable = money at the top.

There are many examples but I recall discussing this topic in the late 1980s at my then HQ in New York (not related to the airline business) and Out Sourcing was all the rage. A wise elder statesman of the company (a female) told me: "It used to be fashionable to own all your own equipment and staff. Now it is fashionable (i.e. makes money) to get rid of them. In due course, they will flip back again and in-source."

Yea, verily, I have seen her words come true.

[LessThanSte]

There are lots of other examples across industry. I used to work in the scrap metal industry - there were several 'waste management' companies with whom a business would enter a contract to have their waste managed. Said company would then farm off individual waste categories (e.g. metal, cardboard) to their supply chain, compiling invoices etc. before presenting a single bill to the customer company on waste management company headed paper, with a percentage uplift on top as profit. I recall a story that there was one company which provided many thousands of tonnes of scrap metal to the large foundries that had never actually transported a kg of steel in its lifetime. The downside of this is that, if something goes wrong, its difficult to pinpoint the blame and, ultimately, the customer probably loses out.

A friend of mine had a harrowing experience with Carphone Warehouse, who his phone contract was with - again, they had never transmitted a byte of data in their lifetime.

The construction sector is perhaps the best example of this though - the large contractors do very little actual work with most being done by a supply chain of varying numbers of tiers, instead only really getting involved in the project/quality management side of things. Generally works well (despite the media view!)

[racedo]

It can work well or be a disaster............... depending on the short / medium and long term view.

Neighbour in the 90's worked for Bass in Logistics, they outsourced all their deliveries in a joint venture to trade team. Draymen were double cabbed, it had been triple until someone questioned why and it had been because 3rd person was to hold the horse while beer dropped into cellar.

Average take home pay for draymen after allowances / ot etc was circa £36k a year (1990's) and this excludes the accidental additional kegs in the truck. As a guesstimate they were losing £500k per month in staff theft per brewery, think there were 5/6 breweries. The new job, suitably renamed offered £12k for driver, £10k for helper and they lost 90% of delivery staff.
Customer service suffered and he claimed they lost £8 million in business as a result in year 1. However by year 3 payback was way better than they had imagined.

He retired 10 years ago and estimated that saving was £100 million. In year 1 almost fired because risks that were there happened but management refused to accept it, by Year 3 everybody knew how good it was. In year 1 they rehired some drivers for a year as "advisers" for their knowledge and experience, not unsurprisingly the hard union men etc were ignored.

Risk in outsourcing is having ability to hold nerve, a proper service level agreement and a willingness to make / amend plan as you are going along.

[PAXboy]

racedo gives a good examples. There are arguments for and against (say) the baggage handling all being done by a single company at one airport and for it being done by several. Nowadays, a lot of companies outsource their I.T. to a third party and this can be much more dangerous. Just ask BA about the two major system failures they had after outsourcing.

[davidjohnson6]

Getting back to the original question.... is there any Govt recognised status which distinguishes a virtual airline as being different from either a travel agent or (if they have an AOC) a conventional non-virtual airline ?

[BA318]

I don’t believe so. If they have an AOC then surely they are just an airline.

As with my example of Flynonstop, their Wikipedia page reads “The company was therefore prohibited for marketing themselves as an "airline" and instead had to refer to themselves as a "travel company".”

[SWBKCB]

I have in mind that after the issues particulalry with Manx2 and Citywing, the CAA introduced tighter requirements to ensure clearer lines of responsibility but I'm struggling to find anything.

[lfc84]

Issues is a rather polite way of putting it.
how about safety breaches and deaths