The British regional airline that was on the brink of collapse just a few months ago is seemingly turning its operations around with the help of several investor groups, including Virgin Atlantic and Stobart Aviation. Flybe announced that its purple colors will turn red – starting from 2020, Flybe will be known as Virgin Connect.

Chief Executive Officer of Connect Airways (a holding company owned by parties who purchased Flybe in January 2019), Mark Anderson noted that Flybe will “remain true to our heritage” and still aims to provide “essential regional connectivity with regional communities”.

“As part of the Virgin (VAH) family, we now have a tremendously re-energised team”, Anderson added. But the regional airline, which put itself up for sale in November 2018, has exhibited signs of financial struggle since 2011, now has a clear path and direction to head to – to align with Virgin Atlantic‘s long-haul network and, as Anderson put it, offer the “same exceptional travel experience” as passengers can expect on “other Virgin (VAH)-related brands”.

For Virgin Atlantic, securing close cooperation with Flybe is crucial. After all, the charismatic airline aims to increase its international connectivity from London Heathrow (LHR) by 400% and, once again, try to challenge IAG and its sister company British Airways’ coercive monopoly in the British international long-haul market.

Little Red Flying Hood

When Virgin Atlantic started operations in 1984, it presented itself as a different in its own way airline, which tried to challenge the legacy airlines that offered “a dull, grey experience”. The brand was loud and, still is, daring. Such proclamations like “BA doesn’t give a shiatsu” were nothing out of the norm for Virgin Atlantic in the 1980s, as the carrier sought after attention to attract customers. And attention was plentiful for the airline, as its exuberant marketing campaigns attracted the eyes of many.

However, the yearly passenger traffic datasheets for the United Kingdom registered airlines, presented by the UK Civil Aviation Authority (CAA), paint a different picture:

·       In 1984, the first year Virgin Atlantic started flying, the airline carried 124,711 passengers on scheduled services out of the total 22.6 million passengers – a market share of 0.55%.

·       In 1994, the airline carried 1.6 million passengers out of the total 71 million – a market share of 2.3%

·       In 2005, 4.4 million passengers flew on Virgin Atlantic aircraft – out of the total 93 million – a market share of 4.7%

·       In 2014, 5.9 passengers chose Virgin Atlantic’s services out of the 124 million, amounting to a market share of 4.7%.

And the latest numbers showcase that in 2018, the airline had a market share of 3.1% (5.1 million out of the total 165 million). Ironically, Flybe transferred more passengers in 2018 than Virgin Atlantic – 3.9 million more, to be exact. Nevertheless, the low passenger numbers are offset by the fact that Virgin Atlantic has a very clear focus on providing long-haul connectivity from the UK. Furthermore, the group‘s bottom line also indicates that its business model is fairly successful in recent years after having struggled between 2009 and 2013:

And while the past few years were written off to losses, the group is amidst a major overhaul of its fleet – it is slowly phasing out its gas-guzzling quad jets, namely the Boeing 747 and the Airbus A340. In 2018, Boeing completed Virgin (VAH)‘s 787 Dreamliner order for 17 aircraft, as it delivered the last three jets. Additionally, Virgin Atlantic has placed orders for 12 Airbus A350-1000 and 14 A330neo aircraft. The first A350 already began commercial service with the airline on September 10, 2019.

But while Virgin (VAH) is replacing its wide-body fleet, the carrier has zero narrow-bodies. Meaning it has to rely on other airlines to transfer passengers to its main hubs in Heathrow (LHR), Gatwick (LGW) and Manchester (MAN). The carrier tried to solve the issue several times.

After British Airways took over British Midland International in 2012, the European Commission deemed that for the deal to be approved, British Airways would have to give up 12 daily slot pairs on domestic and intra-European routes. Virgin Atlantic grabbed the opportunity and established a subsidiary company called Virgin Atlantic Little Red. The domestic carrier would operate only within the United Kingdom, using four wet-leased Airbus A320 aircraft – it commenced operations on March 31, 2013.

Unfortunately, the airline lived a short life. On September 26, 2015, Little Red’s aircraft doors closed for the final time, ending a very unsuccessful endeavor – in 2014, Virgin Atlantic domestic services averaged a shocking load factor of 48%. The airline blamed the competition and slot allocation from the European Commission, “which made it difficult for us to compete on the Little Red routes”.

In the United Kingdom, while LGW and MAN are still growing in terms of long-haul passenger numbers, around 30% of passengers transfer to other flights at LHR. Thus, Virgin Atlantic looked for other options to feed its main hub. Less than a year after Little Red shut down, another airline saved Virgin (VAH)’s domestic connectivity.

To Flybe or not to Flybe

The partnership between Virgin Atlantic and Flybe goes back to April 2016, when the two sides agreed on a codeshare partnership. Initially, Virgin (VAH)’s customers could grab a connecting flight via Glasgow (GLA), London-Gatwick (LGW) and Manchester (MAN) to various long-haul destinations. Now, customers are able to board a Flybe flight and connect to their international destinations via Manchester, Glasgow and Heathrow, according to the airline’s website.

With the acquisition and investment, Virgin Atlantic laid down the foundation for its planned Heathrow expansion, as the regional airline possesses something crucial – slots at Heathrow and regional aircraft. Rebranding the regional carrier to Virgin Connect, which was hinted when the sale was initially announced, also makes sense – Virgin Atlantic’s biggest competitor, British Airways, undoubtedly has a very strong brand in the aviation industry and at airports in the United Kingdom. More presence for the Virgin (VAH) name will only benefit the group, as it attempts to take down the goliath that is British Airways.