A35J

Heya! Newbie here so please forgive me if this post is inappropriate.

I've always been a fan of Virgin but I've never understood its positioning. What sort of segment is the airline trying to capture? Should I see it as a primarily leisure airline, catering to British going to sunny Caribbean/Floridan destinations? Or should I see it as a primarily East Coast to LHR airline, catering to relatively large but unlisted companies with footprints in both countries but not in Europe directly?

Sure if I have to go I go. It won't bother me if an airline has a strange business model. But it's interesting for me (primarily as a new resident in the UK) to understand what locals think about VS. To me, it seems like a strange hybrid of:

- Business traffic to US cities for companies that have limited footprints in a few key cities only (LAX/SFO/NYC/BOS for UK companies, and London only for US companies), supplemented by DL connection if necessary but not a priority
- VFR traffic to LOS, the "richer" part of Pakistan, and the 2 most important hubs in India, but with little emphasis on providing US connecting traffic for them
- High yield student traffic to PVG and HKG with inelastic demand, potentially subsidised by cargo demand during off-peak season
- The large South African diaspora in the UK, with a healthy mix of high end leisure traffic. Again just O&D demand
- British pensioners going on holidays in the Caribbean year-round. Potentially a lot of them are going on Virgin and not BA cos they belong to one group of the above.

Normally I'd expect a UK company to be present somewhat throughout Europe before venturing further afield. So how would their employees be incentivised to fly Virgin if there's a good dose of flying to Germany and Scandinavia required? And if I'm an asset manager - sure I'll need to go to JFK all the time. But what would they do about SIN and DXB? Or is my understanding totally wrong - as in frequent flyers on VS are more loyal and route-specific? Say I have a biotech company and just need to shuttle between BOS and LHR. Or an underwriter/ corporate lawyer that just needs to go to HKG 4-5x a year with no need whatsoever for Tokyo or Beijing?

godfreyb

I overheard a BA executive mouthing off to a relative in a London restaurant last month when I was visiting. The gist of what he was saying was 'that BA was happy with Virgin being in the South Africa market as it encouraged visits and tourism, Virgin scoops up the low end of the market leaving BA to address their market sector'. And there you have it.

sfozrhfco

VS’s main customers currently are the Virgin Group and Delta. As long as VS is able to keep them throwing away millions of pounds to keep the company afloat, it doesn’t really matter what VS does and who flies them.

pazza2000

Agreed, although I’m not so sure how long they’ll be happy to keep propping up for.

A35J

So basically a prestige project to add value to other business units that are actually turning a profit?

craigthemif

It's been 20+ years of losses mixed in with the occasional profitable year. But with enough of a strategic rationale / strong home market to attract airline partners. Today it's Delta, before it was Singapore, etc. etc.

SRB and the Virgin brand do benefit from being having the brand attached to a long-haul airline with a decent reputation.

sfozrhfco

DL put themselves between a rock and a hard place in their desperation for more LHR access via VS. So for now at least, they will continue to throw away millions to avoid losing the partnership. Their strategy certainly has not paid off for them thus far and the dream of VS being profitable in 2023 seems quite unlikely now which is why no other investors were willing to take a stake at this time. DL like SQ and others in the past will have to determine how much money they are willing to flush down to the toilet before giving up. Looks like they are in for some more rough months ahead.

pazza2000

For sure, how much weight does this carry and for how long is the question...

craigthemif

Who knows... I rather cringe at anything with the Virgin brand on it. (except for the airline)

It's probably like football shirt sponsorship. Even though Watford or Brentford (or dare I even say Arsenal or Spurs ) aren't going to challenge for any titles, there's still a ton of value in having your brand on a Premier League team's shirt...

RAPC

People will have different experiences and views of the Virgin brand, but in the UK it is pretty well viewed across many Virgin branded businesses and that is the reason why companies pay some chunky fees to utilise the Virgin name. (e.g. Virgin Media, Virgin Money being a couple of good licenced examples).

The Virgin businesses often have higher levels of customer consideration in the wider market, as well as higher Net Promoter Scores for customers of those businesses. It's something we see consistently in the marketing industry and although not everyone likes SRB or the Virgin brand, slapping a Virgin logo on things does provide a sizeable benefit.

choosethedrew

Those that run BA considering their company to be more high end than Virgin tells you all you need to know about how sh!te a version of itself it is nowadays.

godfreyb

100% agree with that!