Smarter business

Smarter business

Let’s back up a bit.

Two years ago, SAA pulled one of its Johannesburg- London frequencies and Virgin Atlantic saw the gap, diving in to launch a second daily flight between the cities, using the 787 Dreamliner.

According to Gericke and Lerena, the move was a relative success. Volume was great, with 82% load factor, but as with all airlines with a close eye on the bottom line, that load factor didn’t necessarily translate into a fantastic yield.

In layman’s terms, Virgin Atlantic weren’t getting the right ‘mix’ of passengers – specifically, a sufficient amount of travellers in the front of the plane in their Upper Class (business class) section. That’s where airlines make their money.

They also make it by sweating their assets properly.

“For an operation like Virgin, where we have 45 aircraft, flying two aircraft to Johannesburg and leaving both of them parked all day, to only return the following evening, was probably not the best use of our assets,” says Gericke.

Enter the A350, the relatively new – and popular – kid on the block with the world’s top airlines, thanks to its fuel efficiency, lower operating costs and carbon emissions, seating, space, windows, lighting, and configuration options.

It’s also a lot quieter for passengers and Virgin Atlantic has decided to replace the bar it had in Upper Class on the 787 with a new ‘loft’ area.

“Our customers like that social element of Virgin Atlantic, but we’ve gone for something different,” says Lerena. “So, you can still have that cocktail meeting and it’s a nice, bigger social space with more seating, and an extension of the feel you get in our Clubhouse.”

The larger aircraft has 77 more seats than the 787, but more importantly, 13 more in Upper Class (44 vs 31) and 21 more (56 vs 35) in Premium Economy, providing Virgin Atlantic with more opportunities to deliver an attractive yield.

It does mean Virgin Atlantic goes back to offering just one – overnight – flight a day between Johannesburg and London, but the business case is a lot more solid, considering the airline had little trouble in filling a single flight – in the right cabins, of course – two years ago.

“Had we had a 350 a year or two ago, when we took the additional capacity on Jo’burg, we probably would have stuck a 350 on it, rather than two daily flights,” says Gericke. “The reality is that there was an absolute gap in the market and it’s actually done very well, performing above expectation. But, in terms of overall profitability, you don’t want assets standing on the ground all day. You want them to generate revenue for you.”

Another area that has delivered good results for Virgin Atlantic has been the partnerships it has developed over the past decade or so.

The joint venture with American big hitter Delta and the expanded joint venture with Air France-KLM stand out, giving Virgin Atlantic serious clout and international reach, but closer to home it has also flexed its muscles. This time last year saw it buying into UK-based Flybe, which is the largest independent regional airline in Europe, providing more than half of UK domestic flights outside London.

If you read the UK press, there do seem to be some financial challenges for this new entity and offering, which Virgin Atlantic is calling Virgin Connect, but the airline is obviously hoping this investment will add another spoke to its wheel, so to speak.

“Partnerships are about staying relevant and making sure we keep expanding,” says Lerena.

And what about the rest of Africa?

Virgin Atlantic’s other base on the continent is in Lagos, Nigeria, which happens to be the airline’s most profitable route across its entire network.

No surprise, then, that Lagos will receive the next A350, after Johannesburg, leaving Gericke to say: “Africa as a continent is doing very well for Virgin and there are definitely plans for expansion on the continent.”

Looking forward to seeing exactly where.

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