Virgin Atlantic SWOT and PESTLE Analysis

Strength

1. Strong brand value with top of the mind recall: Virgin airlines enjoys a strong brand reputation and was the only British airline in the global top 10, in a survey conducted by Air Help that included 78 airlines across the globe. This was done to find the best airline based on punctuality, quality and the speed of dealing with compensation claims, where Qatar Airways aced this list. It is very popular and preferred particularly in Europe and North America. One of the largest British airliners, it has a strong and loyal customer base who are very satisfied with the services offered by the airlines. It is recalled as a premium airline brand that offers luxury at a cost effective price. Most of the customers buy tickets based on price – a premium airline with a lower cost is an ideal deal. Hence, brand recognition translates into considerable revenue. In 2018 alone, Virgin served nearly 5 million passengers, transported 230m Kg of cargo and its Virgin Holidays customer base spiked to a record 397K.Virgin became the first European carrier to offer in-flight Wi-Fi services across its entire fleet. They also pioneered in offering accessible in-flight entertainment system for the blind customers. With the newly launched transatlantic Joint Venture with Air France-KLM and Delta Air Lines, Virgin expanded to serving over 200 destinations between UK and the US, accounting for 35% share of the total UK-US capacity.

2. Very innovative and unique branding and advertising by Richard Branson: Richard Branson’s antics in promoting Virgin Atlantic were elemental to the brand’s success. A few examples were the Launch of Virgin Cola by driving down Fifth Avenue, New York in a tank. Flying a hot-air balloon or playing a drowning character in a TV Series. In his keynote address at the Adobe Summit in March 2018, he was quoted as saying how his reactive PR stunts were the reason for the brand’s popularity apart from their digital marketing success. When people started stealing the salt and pepper shaker pots from their planes, Richard Branson asked his team to write ‘Pinched from Virgin Atlantic’ on the pots so that it could be a mode of advertisement when the pots reach the dinner table of those who stole them. Richard Branson stresses how important the PR in his organization is with Mr. Will Whitehorn, Virgin’s PR and Communications director as the top paid employee at the firm. Another form of advertisement was when Virgin took on British Airways when the latter was unable to lift off their aircraft from the ground successfully. Branson came up with the London eye titled ‘BA can’t get it up’ which drew instant publicity.

3. Strong north Atlantic network: Nearly2/3rd of the annual revenue of Virgin Airways comes from the North Atlantic region where it is 2nd most popular after British airways. North America and the Caribbean is Virgin’s largest market after the UK. Recent expansions to routes for Detroit and Atlanta and Glasgow have increased focus on this territory and will become the core of Virgin airline's business. Virgin Atlantic dominates routes in the Atlantic region, which account for 83% of its seats and 23 of its 29 routes as of Oct 2017. Virgin's seat share is low at its four UK bases, the biggest being London Heathrow airport. Virgin in fiscal 2017 swapped Detroit service with Delta’s Seattle service to optimize market demand. The British airlines recently expanded their Flybe codeshare to include their new Heathrow-Scotland services, to beef up traffic on their Heathrow flights and improve travel options for the Scottish customers.

4. Joint venture with Delta: Since Jan-2014, Virgin Atlantic’s North Atlantic routes are now part of a joint venture with 49% of the stake, belonging to Delta Air Lines. With antitrust immunity, the ability to coordinate schedules and pricing should be positive for revenues to be generated. Currently, Virgin Atlantic is operating one of Delta’s three daily flights from Delta’s Atlanta airport to London Heathrow with an addition of new flights from Delta’s Detroit hub to Heathrow along with assumption of Delta’s Atlanta-Manchester route. The Delta Joint Venture allowed the carriers to swap two of their US services with daily flights to Seattle now run by Virgin Atlantic, and both London to Detroit flights by Delta, to serve customer preferences. The venture has mutually benefited customers of both carriers by making both players adaptable to customer needs and ultimately improved business. Passenger revenue per available seat kilometer (PRASK) witnessed a Y-O-Y growth of +1.7% in 2018. Virgin Atlantic was optimistic that this trend will continue in the foreseeable future. As per the CEO of VA, this venture will make transatlantic more attractive than it used to be. Also, this joint venture has created opportunities for synergies at both ends.

5. Improved IT and support systems: Virgin Atlantic has overhauled its IT systems by outsourcing its revenue accounts, which involved complex inter-airline tracking and billing. WNS, a global business process management company headquartered in Mumbai, India, provided contact center and data processing services. This included handling e-mails, calls, and mail about reservations, ticketing, fares, baggage tracing, frequent flyer inquiries, and post-flight complaints. Data processing focused on meal allocation, cabin crew reporting, and cargo revenue management. Virgin has also adopted business intelligence software where users can take advantage of a user-friendly business intelligent software tool which hides the complexity of interpreting data. Virgin Atlantic managers are no longer forced to pour over finished and incomplete reports derived from multiple operational sources to track customer activities and entitlements. In short, Virgin Atlantic's users are in control of their data. This has decreased the human efforts and increased the efficiency along with easing the service delivery to the customers. The Commuter service space has been the Virgin group’s latest muse. They have invested in a fully apprised mobile app that is capable of self-service booking technology and updated kiosk functionality. IT Support systems were also an important investment by Virgin including a new tablet device for the cabin crew of all Virgin Flight Service Managers that enable them to provide a better and customized passenger service.

Weakness

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Opportunity

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Threat

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Political

1. Brexit caused Political Turmoil: The year 2016 proved to be a remarkable year for Virgin Atlantic in circumventing a threatening political situation of arsonist hostility in prime areas like Paris, Nice and Brussels. In June 2016, the fact that Britain had opted to boycott the EU which has now been popularly termed ‘Brexit’, sent waves of political and economic disturbances across all member countries of the European Union, including Britain itself. Quite expectedly, the Scottish Prime Minister Nicola Sturgeon announced a poll yet again in order to safeguard the welfare of the people of Scotland in the EU. The possible indications to boycott the EU by Britain were several even before it actually happened.
The UK Government formally notified the European Council of its intent to exit from the European Union (EU) in March. The UK will divorce from the EU on 29 March 2019 with the separation formalities expected to last approximately two years. Virgin Atlantic’s top priority is securing liberal market access between the UK and US when the UK is no longer party to the EU-US ‘Open Skies’ air service agreement. Remaining under the aegis of the European Air Safety Agency (EASA), which is the current body regulating air traffic and operations, is also important. Virgin’s effort to co-ordinate between the two governments had borne fruit and it was expecting new arrangements to be agreed in the foreseeable future.

2. Ambiguity in Future trade policy: The fact remains that Britain has not charted out their new future trade policy for industries to do business with Europe and the rest of the world. Britain has not clarified the polices of the new and liberated Britain would be in favor of those companies who work in sectors that rely heavily on the clout of the European Union like aviation. However, these questions will be answered once these policies are in effect. This has proved to be a source of ambiguity for sectors like Aviation who need to plan their sustainability at least 2 or 3 years in advance. In the event that the policy is not aligned with the company’s strategy, several dollars will need to be sent in transition costs and Change management.

3. Government approved new Heathrow runway: In 2016, the government approved Virgin Atlantic’s plan to introduce a new runway at London Heathrow Airport. This comes in the wake of Brexit and will be a welcome decision for the company. Virgin Atlantic derives a major chunk of its revenue from UK-US air traffic. It is also the leading airline in terms of customer satisfaction in this geography as per the company’s Annual report 2017.The new runway has helped them add new routes from Manchester, a daily service to Seattle, codeshare options with Flybe airlines for flights to Heathrow and also with jet Airways for Trans-Atlantic flights.

Economical

Social

Technological

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Legal

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Environmental

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