The Battle Between Virgin Atlantic and British Airways Heats Up

Virgin Atlantic earned a powerful ally in its bid to gain substantially more landing slots at London Heathrow Airport (LHR) after planned runway expansion is completed. The airport’s CEO John Holland-Kaye told Bloomberg this week that he supports changes to the rules for allocating arrival and departure positions in order to allow more completion at the British Airways base.

If Virgin Atlantic Airways officials are intimidated by British Airways, they certainly are not showing any signs of it, despite the fact that the British flag carrier has not only been a storied institution since the early days of modern commercial aviation but has also long been the dominant carrier at London’s busiest airport. Virgin Atlantic has a dream, however, and the plucky airline isn’t about to be cowed by the hometown carrier (which is now part of any even larger and more powerful multinational airline conglomerate).

Earlier this month, Virgin Atlantic founder Richard Branson created an online petition demanding that U.K. lawmakers recognize Virgin as Britain’s second flag carrier. The move is more likely designed to get under the skin of British Airways officials and highlight BA’s competitive advantage at London Heathrow Airport (LHR) than as a serious effort to be named co-flag-carrier.

“For the first time, passengers in the UK could have real choice for most of their flights at Heathrow, finally changing the market we set out to transform all those years ago,” Branson said in a statement kicking off the campaign. “The UK Government is currently considering how the new Heathrow capacity should be allocated. It’s a critical decision that will be taken in the next few months, which will determine the nature of competition at the nation’s only hub airport for decades to come. If the UK is to see real competition things will need to be done differently. Virgin Atlantic is calling on the government to grasp this once in a generation opportunity by enabling the creation of a second flag carrier to compete effectively across domestic, short and long haul routes at Heathrow.”

This week, the movement got a boost when LHR CEO John Holland-Kaye made public statements supporting Virgin Atlantic’s position. While the Heathrow chief made no mention of supporting Virgin’s quest for recognition as the flag carrier, he indicated strong support for rule changes to allow other carriers to earn a higher percentage of landing slots at the British Airways-dominated airport.

“The new runway presents a massive opportunity to lower fares, but we need a scale player that can compete with BA,” Holland-Kaye told Bloomberg following a meeting with Branson. “To do to that there has to be a change in the slot rules.”

Currently, slots are allocated based on a system in which airlines are rewarded on the basis of existing holdings. Under this scheme, British Airways’ parent International Airlines Group (IAG) is able to control 55 percent of the flights at LHR while Virgin has only a 5 percent share of takeoffs and landings. While only lawmakers can change the system to allow competitors a greater share of the new slots when the planned multi-billion-dollar LHR runway expansion is completed, Holland-Kaye’s endorsement certainly won’t hurt on the political front.

Although he later told reporters that Virgin “is not on a crusade to do harm to BA,” the Virgin Atlantic CEO couldn’t help but to remind lawmakers why having a little more competition at LHR might be a good thing. In addition to cheaper airfares, he noted that it might be nice to have other viable options when BA drops the ball.

“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 thousands of travelers,” Weiss quipped referring to the recent BA pilots strike. “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. 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 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.”