Interview: Virgin Atlantic CEO on Going All-In With Delta and the Dreamliner

How do you blend Virgin Atlantic cool and edginess with play-it-safe Delta?

Craig Kreeger, a former American Airlines executive who became CEO of Richard Branson’s Virgin Atlantic 20 months ago after its Delta joint venture already had been announced, doesn’t appear flustered by the question.

Kreeger, sitting for an interview in a Premium Economy seat on board the airline’s first 787-900 Dreamliner, parked at Hartsfield-Jackson Airport in Atlanta the other day, scoffs at the contention of Willie Walsh, IAG’s CEO, that Delta runs the show in the joint venture and that Virgin Atlantic doesn’t really exist anymore.

“I have to say it’s utterly ridiculous,” Kreeger says, referring to Walsh’s put-down. “And Willie’s words are Willie’s words. But, this airplane doesn’t look like a Delta airplane. Our approach is clearly Virgin Atlantic.”

Virgin Atlantic, which could have Dreamliners as the majority aircraft in its fleet within four years, has been losing lots of money over the past few years, Kreeger says, but it will be profitable in 2014.

A nice chunk of that turnaround will have to be tied to Delta, and the mass of new connections that Virgin Atlantic gets in the process, as well as, eventually, the better economics of flying those Dreamliners.

In fact, Kreeger admits, “our relationship with Delta is so much more valuable than the rest of [our] partnerships combined.”

Skift sat down with Kreeger on October 24 on board the Dreamliner in Atlanta and discussed the Delta Air Lines joint venture, airline alliances, business travel, what’s in store for Virgin Atlantic’s clubhouses, and what Kreeger perceives to be “the coolest job in the industry.”

An edited version of the interview follows:

Skift: We are sitting in Virgin Atlantic’s first Dreamliner, which you named Birthday Girl. The way you’ve designed it, how does it address the needs of the modern traveler, whether it be a road warrior, a leisure traveler or a bleisure traveler?

Craig Kreeger: What is a bleisure traveler?

Skift: A traveler that combines a business trip and a leisure trip.

Kreeger: I just had never heard the Brangelina-fictation of that. Look, I think this airplane has a number of great features regardless of the purpose of your trip or which cabin you are flying in. First of all, when you get on board you typically walk through that door and see the bar and the Virgin Altantic lighting, and it has a kind of ambiance to it that I think is very welcoming. The airplane itself has big windows and the recessed bins that I think create a very open-looking space.

We have a brand new Premium Economy seat that we have redesigned. We do have leisure customers flying in this cabin (Premium Economy) quite a bit. And, of course, our Upper Class seat is the next generation of the seat that we’ve been really, really happy with on many of our other airplanes. Some of the basic features are excellent. The entertainment system is brand new.

We really differentiate by providing a great environment and having people who are really truly Virgin Atlantic and are there to serve customers well and have a great spirit of fun about them. And I think those things create a very welcoming place.

Skift: Speaking of the spirit of fun and what Virgin Atlantic is known for, your friend, IAG’s Wille Walsh, was quoted as saying the “Delta management team are much more rational [than Virgin Atlantic] … Virgin has almost disappeared … Delta controls Virgin … We just call it Delta now.” What do you have to say about that?

Kreeger: I have to say it’s utterly ridiculous. And Willie’s words are Willie’s words. But, this airplane doesn’t look like a Delta airplane. Our approach is clearly Virgin Atlantic. Flying into Atlanta is great for the UK customer to connect to all the destinations that this big hub offers. We value our partnership with Delta. We work together; we sell against British Airways and American. But one of the ways we do it successfully is because we have a product, a service and an ethos that customers like to fly on that is uniquely Virgin Atlantic and is not going anywhere.

Skift: How has your approach changed, if at all, since beginning the joint venture with Delta. Have you learned anything from Delta? Have they learned any things from you?

Kreeger: I think the short answer to that question is we’ve definitely learned things from each other. In our case, Delta is very experienced at being a joint venture partner and their speed at helping implement sales programs, particularly in the United States, where they have done so in the past with Air France-KLM and Alitalia, was very helpful in getting the joint venture up and running. They have great hubs that feed into our joint venture. We are seeing such a big increase in connecting customers.

And I think their customers and they (Delta) are feeling great experiences flying on Virgin Atlantic airplanes. Last April we moved many of Delta’s Heathrow flights — in fact, all of them in markets that we both serve, Boston, New York, Seattle, as well — into our terminal in Heathrow, Terminal 3, where their customers are checked in by our staff and utilize our clubhouse. And what we are seeing is just great reaction from their customers who are experiencing Virgin Atlantic. So I think we are both benefiting from working with each other very nicely.

Skift: What about airline alliances? What do you have against alliances or what do they have against you? And does Virgin Atlantic see value in joining SkyTeam?

Kreeger: There clearly is value in SkyTeam membership, but there is also value in our partnerships with non-SkyTeam airlines that might have to go away if we were to join SkyTeam. As a result, we’ve pushed off making a decision, and frankly so much of our route network comes here to the United States, paying off for our customers and ourselves. Our relationship with Delta is so much more valuable than the rest of the partnerships combined. We are going to focus on that first, and then we’ll figure out the SkyTeam question later. 

Skift: Given your stance on alliances, what do you think of Etihad’s approach in creating a new sort of alliance through partnerships? What kind of relevance does that have for you?

Kreeger: You know, I don’t know what to make of Ethad’s approach. It is hard for me to look at the combinations of things they’ve acquired to figure out how it all fits together in a logical way yet. I will say that regardless of that the growth we see in the region is a huge competitive issue in the industry. We are relatively insulated in that most of our capacity doesn’t fly over routes that would likely be served over Dubai or over Abu Dhabi or Qatar. But watching them go about their business it will be really interesting to see how they put it together.

Skift: Delta parks more planes on one concourse in Atlanta than Virgin Atlantic has in its entire fleet (40 planes). Do you think Virgin Atlantic should stay around its current size or would you like to see it grow?

Kreeger: We are going through a period where we lost a fair amount of money over the last three years. And we are going to be profitable this year and we expect that we are going to be a lot more profitable as we proceed. I think as we demonstrate the ability to earn competitive returns with the assets we have there should be opportunities for us to grow.

We are always constrained by the fact that growing at Heathrow is very, very difficult. So I don’t think we can grow gigantically, significantly bigger. We can’t have a 10% per year growth plan ever. That capacity isn’t available to us. Could we get a new airplane every year or two and acquire slots as they become available occasionally? There will be little bits that we can do. We should be able to justify small growth over the next several years, but not ever something that would change us fundamentally from our current size.

Skift: I’m intrigued by the fact that you said earlier today that within four years the 787 Dreamliners will make up the majority of your fleet. What are the implications of that and what prompted the decision?

Kreeger: For all 21 of the aircraft that we’ve ordered — 17 of which are firm and four of which are options — they will be replacing existing aircraft, A340-600s, A340-300s and Heathrow-configured 747s. That airplane is coming in and filling a real opportunity for us with a more modern product and service with much better economics. And that combination of great customer service and economics is clearly a winning strategy. The more of them we can get, the better that plays out.

Skift: Were you bothered at all about the Dreamliner’s battery problems and that whole thing, or is that in the past now?

Kreeger: I think it is in the past now. This is actually the fourth 787-900 so it is a stretched version. By virtue of taking the second iteration rather than the first we have benefited from all the work Boeing has done in production with all of the improvements they’ve been making in the 787-8 since it has been operating for the last couple of years.

As we look at it, its early stage reliability [is on par] with other airplanes of this ilk that have been delivered. It is very good. So we don’t have to have any concerns about it.

Skift: What are your thoughts on seamless travel, meaning self-service, high-tech innovations such as your Google Glass concierges and boutique services like the chauffeurs? How do they all fit in when thinking about today’s competitive environment, and how many of them will Virgin Atlantic continue to explore?

Kreeger: There is no limit to the number of things we are going to continue to explore. I think Richard’s (Branson’s) ethos is a spirit of how can we do things better for customers. That is what launched the creation of Virgin Atlantic in the first place. It was his own unhappiness with flying on other airlines. That spirit of trying to find the next thing that will make things better will continue.

We do plan to go into production with the Google Glass experiment. I don’t know if it will ever be in many locations but in some of our bigger locations where we have premium service specifically. Having information available to our people so they don’t have to go around behind a desk to look, and to be able to deliver that information to customers will allow them to be much more with the customer instead of being separated by a computer terminal.

We tried a number of things. We tried watch technology. We tried the glasses. But once our team got used to how to do it quickly it turned out that the customer liked it [Google Glass] and our people liked it.

Skift: A lot of airlines talk about personalization but not many of them are doing it. The Google Glass test, as you describe it, really seems like an opportunity to do that.

Kreeger: We made a decision to go to a much more modern passenger services system [Deltamatics], which creates some capabilities to deliver more information about our customers to our people to help them give more personalized service. We have great individualization. In other words, our people act as individuals and serve our customers as individuals, but I think we have an opportunity to do it better, and I think the technology will help us with that.

Skift: Virgin Atlantic has traditionally been known for its lounges. Can we expect innovations in that area in terms of new services and the introduction of new lounge products?

Kreeger: I don’t have anything specific to announce to you about what we may be doing. We will keep looking for new things to do. We still get rated wonderfully for our lounges. We are actually now refurbishing some of ours that are a few years old and we recently made the decision to create a lounge in Los Angeles for the first time. It will be our first clubhouse in L.A.

Skift: One more question. Are you having fun at this job?

Kreeger: I’ve been here for 20 months, I guess, almost two years. When I took this job a couple of my friends told me you have the coolest job in the industry. I never felt any differently than this. And that is fun. It is totally true.