Virgin Atlantic to Fight BA in UK Domestic Market

Virgin Atlantic is to launch air services on at least two domestic UK routes from March 2013 after the carrier revealed that it had been selected by the European Commission ahead of Aer Lingus in the fight for the short-haul remedy slots available following the acquisition of bmi British Midland International by British Airways’ (BA) parent International Consolidated Airline Group (IAG). This will likely now see the airline launch flights to London Heathrow from Aberdeen and Edinburgh, supporting its existing commitment to also serve the UK’s main international gateway from Manchester.

According to the carrier, its business case has been based on a ‘one airline’ policy, suggesting that a single operator using a package of remedy slots would be better positioned to mount a credible challenge to BA’s existing domestic network to London Heathrow. Without the remedy slots, BA would effectively be able to continue to fly from Scotland to Heathrow uncontested, but as Virgin Atlantic’s outgoing boss explains, domestic flyers now have a compelling alternative.

“We have fought hard for the right to fly short-haul and take a strong challenge to British Airways within these shores. This is the beginning of an exciting new era in Virgin Atlantic history. Passengers can look forward to a great short haul service with us but most importantly reap the benefits from the re-injection of vital competition we can provide on these routes,” said Steve Ridgway, Chief Executive Officer, Virgin Atlantic.

Under the terms of the original approval of the IAG-bmi deal, the European Commission had demanded IAG release 14 daily slot pairs at London Heathrow in order to facilitate new entry. These comprise seven slot pairs to facilitate new competition between London Heathrow and either Edinburgh and/or Aberdeen and five daily slots to be used between London Heathrow and Nice, Cairo, Riyadh, Moscow, Edinburgh and/or Aberdeen. Two further slot pairs are being leased to Transaero Airlines to enable it to maintain its twice daily route between London Heathrow and Moscow Domodedovo.

Virgin Atlantic says it will work to finalise its plans for utilisation of the available remedy slots over the next two weeks and then will confirm a flying timetable. It makes no mention of Cairo or Nice and has no rights to serve Moscow and says it will “primarily focus on its flying between Scotland and Heathrow, running multiple daily flights” from March 31, 2013 and will be working with a wet-lease partner “to provide narrow body Airbus A320 aircraft” to operate these short haul flights.

This partner is expected to be Lithuanian carrier Avion Express after the company placed recruitment adverts this week for London Heathrow-based crew. "Avion Express is recruiting Airbus A320 pilots and cabin crew for a longer term contract for scheduled operations based in London Heathrow, starting on March 2013," it said in the adverts.

Virgin Atlantic will find it tough to compete directly with BA in the domestic skies, but it has already shown against all odds that it can succeed following its developments in the long-haul market. It expects to generate a notable flow of O&D traffic as well as strong numbers of transfer passengers to its own long-haul flights at London Heathrow. When it makes a formal decision on its alliance membership in the coming months, this will also provide additional connectivity options from the UK hub.

According to official UK Civil Aviation Authority (CAA) statistics, 652,250 passengers travelled between London Heathrow and Aberdeen, 1,271,459 between London Heathrow and Edinburgh and 766,906 between London Heathrow and Manchester last year. Virgin Atlantic expects to generate around a 40 per cent share of the existing demand on these routes, as well as attempting to stimulate the market further. It suggests it could carry around 1.5 million domestic passengers on an annual basis, according to reports.

The table below highlights the proposed air capacity already scheduled between London Heathrow and the Aberdeen, Edinburgh and Manchester markets in April 2013. As can been seen, Virgin Atlantic will not only face direct competition from BA, it will also face indirect competition from easyJet, CityJet and BA’s London City-based CityFlyer subsidiary, which has further boosted capacity in these markets ahead of the expected new entrant competition.