Seeing the Big Opportunity

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Its’ been a busy year for Virgin Atlantic, with new leadership, a big joint venture announced, plenty of restructuring and a review of all parts of the business. Their man in Johannesburg also has a new job, so editor Dylan Rogers tracked down Simon Newton-Smith, the man now heading up the Middle East & Africa, and managed to grab 20 minutes of his time over coffee in Hyde Park.

As the name suggests, the Atlantic is a big part of the Virgin Atlantic operation, so the 2013 joint venture with Delta has made sense. The American giant bought the 49% stake held by Singapore Airlines, and the JV comes into effect on 1 January.

“The world has been changing over the last few years and we have a formidable competitor in the British Airways/American Airlines alliance,” says Newton-Smith. “Delta wanted more access to Heathrow, and we get far greater access to the US market, with stronger distribution to help us on the North Atlantic.”

Virgin Atlantic will now be incredibly strong in that region, with the Delta deal resulting in up to nine daily flights out of New York, for example.

“The North Atlantic is typically a frequency market,” says Newton-Smith. “It’s a massive business travel destination, but the traveller is looking for more than one or two flights a day.”

With all that focus on the Atlantic, the perception may be that Virgin Atlantic has taken its eye off the ball in Africa, particularly with the Nairobi and Accra routes falling by the wayside in the last year. Not so says Newton-Smith.

“Africa is a hugely important market,” he says. “Nigeria and South Africa have been our mainstays for many years, and our success there gave us the confidence to explore additional markets. But, the reality is that it’s not the easiest market to operate in. The African market is quite volatile.”

Newton-Smith makes it clear that the Nairobi and Accra routes have been suspended, rather than cancelled altogether, and Virgin Atlantic hopes to resume service on these routes at some stage in the future.

“The industry has been hammered over the last five years – fuel price and economy – and we’ve had to make some tough decisions,” he says. “There is opportunity, but not in the short-term. Our job right now is to keep those markets warm and consider the right time to consider returning.”

Further Virgin Atlantic developments in 2014 include the airline taking delivery of the first 15 Boeing 787-9s, the new version of the 787, whilst Newton-Smith is expecting more competition in the Premium Economy space, a space Virgin Atlantic has inhabited for approximately 20 years.

Premium Economy is becoming more mainstream now and our competitors are also recognising the economy of it,” he says. “It’s encouraging to see other airlines launch a Premium Economy product, because as the product becomes more understood, demand for everybody will go up.”

That’s not the only thing Newton-Smith would like to see develop in the near future. He’s a firm believer in the facilitation role that the airline business plays in promoting economic development.

“The airline business is a communication tool,” he says. “It enables economic growth, tourism, and effective business to business transactions. The prize shouldn’t be the tax collection on the ticket, or the air passenger duty – the prize should be getting the people into the country to spend money.”

With this in mind, Newton-Smith would like to see some ‘out-of-the-box’ thinking in Africa.

“There is a real opportunity for African countries, with limited network, to rethink the strategy of buying two or three aircraft, putting the flag on the tail and hoping for the best,” he says. “Rather, ask what needs to be done to establish sustainable ongoing communications safely, reliably and affordably. Look at the long-term goal – Africa is one of the few parts of the world where there is still massive opportunity for growth. So, avoid making the mistakes everyone else has made.”

What is clear is that Newton-Smith is passionate about the African continent, and the opportunity it offers in the airline space.

“For me, it’s the biggest untapped market on the planet,” he says.

Those with a vested interest in the African continent would no doubt agree and certainly hope he’s right.

Dylan Rogers