The Takeoff Episode 03: Why Team and Culture Matter for Travel Startups Sponsored This content is created collaboratively with one of our sponsors.
With acquisition talks with Delta and Air France-KLM under way, Richard Branson could reduce his direct involvement with Virgin Atlantic, but don’t expect the Virgin brand to make a quick exit.
If Delta Air Lines eventually succeeds in acquiring Singapore Airline’s 49% piece of Virgin Atlantic Airways, and Air France-KLM chips in to buy part of Richard Branson’s stake, don’t expect Delta to apply red and blue paint to Virgin’s fuselage and tail, and simply rebrand the airline as “Delta UK.”
Henry Harteveldt, chief research officer at Atmosphere Research Group, notes that Virgin “still has a very good name and reputation,” and doubts that Branson would entertain seeing the brand disappear, given the Virgin Group’s widespread investments and holdings and the ongoing royalties the airline brand generates.
Published reports indicate that Delta flirted with acquiring a chunk of Virgin Atlantic a year ago, with the talks breaking down in part on the future of the Virgin brand.
The real value in Delta and Air France-KLM jointly investing in Virgin Atlantic would be for those prized slots at Heathrow, which would give SkyTeam a much-bolstered presence in London, Amsterdam and Paris, gateways for Europe and the Middle East, Harteveldt says.
And those gates at Heathrow would give SkyTeam a clear advantage over the Star Alliance in the London market, Harteveldt adds.
Virgin Atlantic doesn’t belong to one of the three major airline alliances, and competes with oneworld member British Airways in London.
The many faces of Virgin
From Virgin Trains to Virgin Media and Virgin Atlantic, many of Branson’s largest brands are not majority-owned by him, or they have huge pieces held by other companies, notes the Guardian in an article titled, “Virgin Brands: What does Richard Branson really own?”
The Virgin Group points to twelve brands among its travel holdings, and they are operated independently — although the Virgin airline brands airline have code-share relationships, and Virgin Holidays uses Virgin Atlantic flights, for example.
The financial performance of these travel brands also vary widely.
Virgin’s travel family
Virgin America: Founded in 2007 with a minority stake from Richard Branson, the San Francisco-based low-cost carrier has won passenger loyalty and media plaudits with its sleek onboard amenities, including fleet-wide Wi-Fi, leather seats and in-flight entertainment, but has been struggling financially. The airline recently slowed its expansion plans, trimmed capacity, asked employees to take voluntary leaves, and saw its third-quarter losses widen to $12.6 million.
Virgin Atlantic Airways: The airline, which operated its maiden flight from Gatwick to Newark in1984, is entering a transitional phase, regardless of the outcome of talks with Delta. Branson serves as founder and president, but CEO Steve Ridgway is resigning his post in Spring 2013. In its June 30 financial report, Virgin Atlantic, which operates some 38 aircraft, posted a fiscal year 2012 pre-tax operating loss of $129.1 million. Ridgway cited the challenges of high fuel costs and an increase in passenger taxes.
Virgin Australia: Launched as Virgin Blue in 2000, the airline, a public company, changed its name to Virgin Australia in 2011. Virgin Australia posted a fiscal year 2012 profit of $22.8 million ($23.7 U.S.) at the end of June, compared with a $67.8 million loss ($70.6 U.S.) the prior year. In addition to its domestic schedule, where it competes with Qantas, Virgin Australia flies to North America, where it has a codeshare with Delta and Virgin America, as well as Europe, Asia, South Africa, and the Middle East.
Virgin Galactic: The company, which plans to send travelers into sub-orbital and then eventually space flights, also last month took 100% ownership of The Spaceship Co., which is charged with building Virgin Galactic’s carrier aircraft, WhiteKnightTwo, along with sub-orbital aircraft SpaceShipTwo. With its presence in New Mexico, SpaceShipTwo had completed 16 free flights as of last Summer.
Virgin Hotels: Launched in 2010, Virgin Hotels has a $500 million bankroll for hotel acquisitions, and is looking to partner with 150-400-room urban properties in North America. Seeking to leverage design experience and brand clout, Virgin Hotels says it is open to managing properties, partnering with existing owners or acquiring the locations outright as it appeals to a metropolitan road warrior and leisure-travel audience.
Virgin Holidays: Launched in 1985 to help fill seats on the young Virgin Altantic’s routes to New York and Florida, Virgin Holidays, a tour operator, sends UK travelers on holiday to Florida, Mexico, the Caribbean, Thailand and Dubai, among other destinations. Virgin Holidays last month estimated that 2013 bookings are up 20% year on year.
Virgin Holidays + Hip Hotels: A joint venture with the publishing brand HIP Hotels, Virgin Holidays + Hip Hotels curates recommendations for designer hotels and getaways in far-flung destinations around the world.
Virgin Trains: The joint venture between Virgin Group (51%) and Stagecoach (49%) started operating the UK’s InterCity West Coast franchise in 1997. The operator’s franchise was set to expire this month and handed over to FirstGroup, but the transaction was cancelled after flaws were found in the vetting process. Virgin is expected to sign a deal this week that will give it a temporary 13-month extension to the franchise. The Financial Times reports that Virgin Rail has reaped higher profit margins on the west coast main line than most UK rail franchises since privatization.
Virgin Vacations: The tour arm of Virgin Atlantic Airways offers holiday packages, guided tours, and rental cars. The Internet travel service was founded in 1994, but became a separate company in 2002 after partnering with other airlines.
Virgin Holidays Cruises: This independent and privately owned cruise operator books itineraries on the ten major cruise lines. The company offers “Stay & Cruise” packages that include Virgin flights, Virgin Holiday hotels, and VIP touches like access to v-room lounges for an extra cost.
Virgin Limobike: The motorcycle taxi service is faster than a car in taking travelers to the airport or business people to meetings. Riders hop on the back of a motorcycle for this quick and quirky mode of transportation. The service launched in 1995 and has never expanded beyond London.
Virgin Limited Edition: The luxury division of Virgin Hotels Group offers packages for eight exclusive vacation retreats. The unique options include photographic safaris at Ulusaba Private Game Reserve in South Africa and kite surfing on Necker Island.