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Article from BTNews 23 SEPTEMBER 2019

COMMENT: Virgin on the attack

It is a basic tenet of most businesses that cartels, or monopolies, while cosy for the entities involved, are a bad thing for the consumer. Many consider the dominance at Heathrow of British Airways’ parent company International Airlines Group (IAG) to be a case in point.

Whatever the arguments for and against, the matter was brought to a head last week by Virgin Atlantic CEO Shai Weiss. As reported in this issue, Weiss was presenting his airline’s case for a major increase in operations from the UK’s No 1 hub airport when the third runway, with its associated expansion in capacity, is built. (See Virgin plots Heathrow revolution in this issue.)

In a nutshell, more capacity means more slots, and Virgin wants what it sees as its fair share of them.

As Weiss put it: “Never has the need for effective competition and choice at Heathrow Airport been more evident than during this summer of disruption, which has brought misery for tens of thousands of travellers.

“Britain, and those who travel to it, deserve better than this. Air passengers need a choice and Virgin Atlantic is ready to deliver when Heathrow expands.”

Calling for what he called the IAG “stranglehold” to be broken, Weiss went on: “Heathrow has been dominated by one airline group for far too long. The third runway is a once-in-a-lifetime opportunity to change the status quo and create a second flag carrier.

“This would lower fares and give real choice to passengers, as well as giving Britain a real opportunity to boost its trade and investment links around the world.

“Changing the way take-off and landing slots are allocated for this unique and vital increase in capacity at the nation’s hub airport will create the right conditions for competition and innovation to thrive.”

Virgin says it intends to serve up to 84 new destinations in the UK, Europe and across the globe when the third runway is complete, a fourfold increase on its 19 long-haul destinations from Heathrow in 2020.

Significantly, with plans for the future of Flybe under the umbrella of Connect Airways – in which Virgin is a major partner – still pending, the proposal also foresees a new comprehensive network of domestic and European routes when the airport expands.

Connect was founded last December by a consortium of Virgin, the Stobart Group and Cyrus Capital to acquire Flybe after the Exeter-based airline issued a profits warning and put itself up for sale a month earlier. A rebrand for Flybe has been on the cards since.

A statement by Weiss last week emphasised the government’s Aviation Strategy Green Paper had set “a primary objective” for the allocation of additional Heathrow capacity “to facilitate effective competition between airlines, benefitting consumers through more choice and lower fares”.

It had also set secondary objectives to improve domestic connectivity and to improve connectivity to international destinations that are currently underserved or unserved. Virgin’s route network plans, Weiss said, “enable the government to meet all three objectives by bringing new competition across multiple domestic, European and global routes, as well as opening up brand new destinations.

“Without a second flag carrier connecting passengers between its domestic, short- and long-haul services, these important objectives cannot be met.”

Virgin, still tiny in global terms but well capable of punching above its weight, has put up a powerful argument. The reaction from IAG can be guessed but has so far not been made public – the group appears to have more things on its mind. It will be interesting.

This year has been one of significant growth for Virgin, with the announcement of three new routes from Heathrow to Tel Aviv, Mumbai and São Paulo, the Connect Airways launch and an expanded joint venture with Air France, KLM and Delta in prospect by the end of the year.

The latest addition to the airline’s fleet, the Airbus A350, took to the skies this month and follows the airline’s announcement in June that it will purchase 14 A330-900neos, with Virgin claiming this means by 2024 it will have one of the "youngest, cleanest, greenest" fleets in the sky.

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All comments are filtered to exclude any excesses but the Editor does not have to agree with what is being said. 100 words maximum

David Starkie, London

Not sure that Virgin is a second flag carrier anymore given its ownership structure. It emphasises the need for competition at Heathrow and yet seeks an administered preference in the allocation of new slots!