King of the carrier castle

Virgin Atlantic has great timing, clever PR, and a knack of benefiting from others’ misfortune. Is there no holding it back? asks Mark Choueke

The latest furore surrounding British Airways – allegations of price-fixing amid rising fuel surcharges, leading to an Office of Fair Trading (OFT) investigation – is believed to have been instigated by Virgin Atlantic after reports of attempts by BA to collude with Virgin Atlantic over ticket prices reached Sir Richard Branson.

Virgin Atlantic is the second-largest long-haul airline in the UK with a network that has grown to include 26 destinations worldwide. Arch rival BA is much larger in every sense, but the future looks rosy for Virgin. It is 51%-owned by Branson, arguably the canniest PR figure around, who uses the misfortune and wrongdoings of rivals to his advantage.

Just as in 1993 when he was offered a bribe to pull out of a two-horse race to run the National Lottery by rival bidder Guy Snowden, and won the court case in 1998, Branson alerted the authorities to the potential breach of competition law among airlines. Though it would have been impossible for Branson to have timed the resulting investigation and hype to his advantage, the damaging news for BA occurred at the perfect time for Virgin Atlantic.

In the week after the story broke, as BA’s share price and image were crumbling, Virgin Atlantic was able to announce record-breaking results, an additional daily flight to New York and the launch of a twice-weekly service to Mauritius.

Virgin Atlantic insists it is aiding the investigation but is not a target, despite reports the inquiry involves not only BA. Competition lawyers and airline analysts have speculated that by providing the all-important initial information, Virgin Atlantic may have taken advantage of OFT regulations offering whistle-blowers immunity against prosecution. The company announced last week that a large increase in business travellers helped boost profits and achieve record sales in the financial year ending February 28, 2006. Revenues were 17% up on the previous year at &£1.9bn. Pre-tax profits more than doubled to &£41.6m against a tough operating environment where fuel costs rose 30% in a year.

Asked about Virgin Atlantic’s role in the controversy, an insider refuses to confirm or deny any involvement. “If any company discovers any activity it thinks may be illegal or anti-competitive, it should go straight to the relevant authority. We are not targeted in the investigation, we have not been raided by the OFT, and we have not put anyone on unexplained leave of absence. That tells its own story.”

An official spokesman, however, is keen to discuss how innovation is at the heart of Virgin Atlantic’s success and will continue to be key to a strategy that seeks to make the airline “the best, not necessarily the biggest” of all long-haul carriers. A recent change in the airline’s focus has seen it shift from all markets to a strong focus on business travel.

Over the past year, Virgin Atlantic has invested in new onboard and on-the-ground facilities for business customers, such as the award-winning Clubhouse at Heathrow. The sixth daily flight between London and New York, beginning this month, will be joined by a second daily service between London and Hong Kong from November.

The spokesman talks of “a strong intent to get the product right in the air and on the ground” to convert business travellers who usually fly BA. Virgin Atlantic claims to have carried more than 50 million passengers since launching in 1984, and a record 5 million last year alone.

Fears that the young and rebellious associations of the wider Virgin brand will put serious business travellers off flying Virgin Atlantic may be proved wrong with the latest Rainey Kelly Campbell Roalfe/ Y&R executions showing the Statue of Liberty pictured in a Virgin Atlantic limousine, sipping a cocktail in the airline’s Clubhouse, and asleep on board a craft in the Upper Class flatbeds.

Virgin Atlantic predicts the campaign, running in the Financial Times, Economist and the Sunday Times, will be a success. “Clever marketing will help,” says a spokesman, “but our customers will return to us because we treat them as guests. People like being listened to and treated well.”

The signs are positive. Analyst Eli Abeles of London-based air travel consultancy says/ “Virgin Atlantic is realising its full potential. It is growing in confidence and exploiting the business market, which is by far the most profitable.

“With additional routes to New York and the Far East, as well as new routes to the likes of Dubai and parts of Africa, Virgin is now far more credible and can say to corporate clients ‘we can do you a deal and serve your needs across the whole of your business as your retained airline’. That is a powerful marketing tool to have.”