Q&A: Cutting One’s Cloth

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New Virgin Atlantic chief executive Craig Kreeger has only been in the hot seat for a couple of months, but that’s more than enough for him to get a sense of what he’s in for, and what the future holds for the airline, particularly from an African point of view, with Virgin recently closing its second major route in a year.

Where does Africa sit in the Virgin Atlantic strategy?

As with all destinations, we focus on business centres and some tourism centres that have either historic, future or currently strong commercial relationships with London or the UK. So, it’s currently Johannesburg on a year-round basis, Cape Town as a seasonal leisure destination, and we also fly to Lagos.

You’ve just closed your Accra, Ghana route. Why and are other routes at risk?

The price of fuel in Ghana, coupled with a lack of attractive arrival slots into Heathrow and a continued weak global economy, have all contributed. These are still challenging times for the airline industry and we have to deploy our aircraft on routes with the right level of demand to be financially viable. Unfortunately, Accra has never been profitable for us. We have no plans to suspend any other routes.

And just a year ago you closed your Nairobi route?

It struggled financially for quite some time, before the decision was made to exit. It wasn’t helped by taxation and things that make travel more expensive. We fight that everywhere now, along with the short-sightedness of the UK government. So, I think that was an issue on a marginal route and always will be. The bottom line is that the route didn’t grow into being a profitable one, and at some point you have to make the call.

Is Virgin Atlantic in danger of losing its competitive edge in Africa?

Absolutely not. Whilst we are disappointed to have to suspend services to Ghana, the market places in our destinations across Africa are very different. For example, in the 12 months to April, our load factor to Cape Town grew 7% and Johannesburg grew 3%. We’ve also been seeing strong business travel growth on Africa routes, with Lagos Upper Class load factors up 3% in the 12 months to April. In the 12 months to April, VS to VS connections between Africa (Lagos, Johannesburg, Cape Town combined) and New York grew 70%, helped by the launch of JFK3.

Does Virgin have growth plans for Africa?

Not today, but we will continually look for both where there are routes that are underperforming that we should do something about, and where there are opportunities where we could take that slot at Heathrow with the air asset that we’re flying, and use it some place that could be a new route or additional capacity on an existing one.

Could Africa come into focus more in future years?

Yes, of course. As we take delivery of smaller aeroplanes like the 787s, which we’ll do in September 2014, we’ll have the ability to fly a more fuel efficient aeroplane on a developing route, and not have it lose so much money. So, that will be a great aeroplane for starting new routes. Whether it will be Africa or someplace else is still to be determined. Currently, for a long-haul route like Johannesburg, our only alternatives are four-engine aeroplanes. So, without a lot of traffic and without a lot of demand, those planes are not going to be profitable.

Just how difficult and expensive is it operating out of Heathrow?

It’s perhaps a little unfair to describe Heathrow as incredibly difficult. It’s expensive, but also because it’s extremely constrained. When I talked about the short-sightedness of the UK government, I guess what I would say to summarise, is that both in the short-term, in the form of taxation, and in the long term, in the form of infrastructure, the UK government has consistently, in my opinion, undervalued the role of aviation and transportation in driving economic development.

Are there any business travel-related products or development you are looking at, to enhance the business travel experience?

Onboard Wi-Fi is becoming increasingly standard, and we are obviously now going back and figuring out how to make that happen. But also, ease of transaction – making sure that we have the capabilities both with our website and with our relationships with travel agencies and corporations, to make it easy for the selection and booking process. What customers really want is to fall out of their car into our lounge. So that’s a process I’d really like to smooth.

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