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Virgin Atlantic SWOT & PESTLE Analysis

ID : 52402653 | Jun 2018 | 19 pages

COMPANY PROFILE - Virgin Atlantic

Business Sector : Aviation

Operating Geography : London, Global

About Virgin Atlantic : Virgin Atlantic is a British airline with its head office in Crawley, United Kingdom. The airline was established in 1984 as British Atlantic Airways by Mr. Richard Branson. The company has a very peculiar history. Before Virgin Atlantic was incepted, Mr. Branson had one of the most successful recording firms in America, called Virgin Records. He gave up the company in order to venture into a new and growing sector at the time- Airlines. The airline, comprising of Virgin Atlantic flights and Virgin Atlantic Cargo along with Virgin Holidays is controlled by a holding company, Virgin Atlantic Limited, which is 51% owned by the Virgin Group and 49% by Delta Air Lines. Currently, the company has extended its reach to many product lines from Virgin Cola to wedding gowns and financial services. This British airline, which is headquartered in Crawley, United Kingdom, nurses a strategic vision “to ensure sustainable growth is delivering an irresistible customer experience.”It was voted #1 for UK-TATL customer satisfaction and has flown close to 5.3 million passengers in 2017. It has approximately 9,800employees as of 2018.

The Company’s mission statement is “to embrace the human spirit and let it fly”. Virgin Atlantic’s USP or Unique selling proposition lies in being a premium British airlines offering luxury at affordable pricing becoming the first European carrier to offer in flight Wi-Fi across its entire fleet.

Virgin Atlantic Revenue :
£2,663.7 million- FY ending 31st December 2017 (y-o-y growth (negative) -1%)
£2,689.9 million - FY ending 31st December 2016

Competitive Analysis of Virgin Atlantic

The SWOT analysis for Virgin Atlantic is presented below:
Strengths
Weaknesses
1. Strong brand value with top of the mind recall
2. Very innovative and unique branding and advertising by Richard Branson:
3. Strong north Atlantic network
4. Joint venture with Delta
5. Improved IT and support systems
1. Failure of “Little Red”
2. Dependency on Richard Branson
3. Lack of global presence
4. Private Ownership
Opportunities
Threats
1. Relationship with Delta
2. New fleets and routes
3. A new runway at Heathrow
4. Increase business with global alliances
5. Possibility of an Alliance with Air France KLM
1. North Atlantic overcapacity
2. Clash between the Unions
3. Intense competition from Gulf and domestic operators
4. Brexit impact posed to curb traffic
5. Hurricane disruption and engine woes

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Detailed SWOT Analysis of Virgin Atlantic

 

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 2017 alone, Virgin flew 5.3 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 code share to include their new Heathrow-Scotland services, to beef up traffic on their Heathrow flights and improve travel options for the Scottish customers.

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Weakness

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Opportunity

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Threat

1. North Atlantic overcapacity: The concentration of Virgin Atlantic's network on the North Atlantic makes it very vulnerable to the aviation demand of that region. The effect of this supply-demand imbalance should be mitigated by the positive impact of the nascent joint venture with Delta, but VA's profitability will continue to be susceptible to the health, or otherwise, of the North Atlantic aviation market. The company must also take into account that although 27% of it is spend is on the North Atlantic region, they are heavily biased to the region instead of focusing on fast growing markets like Asia and South America.

2. Clash between the Unions: The clash between the Professional Pilots’ Union (PPU) and British Airline Pilots Association(BALPA)in 2016 had become the cause of many of Virgin Atlantic’s woes. About 70% of 900 pilots who are part of Virgin Atlantic’s workforce are in favour of PPU. The bone of contention arises from the fact that Virgin Atlantic recognizes BALPA and not PPU as their formal Pilot Union. PPU started a series of protests across Europe that originated in France where pilots did not operate the flights they were designated, resulting in several flights being delayed or cancelled. Airlines had appealed to the European Union to intervene so that passengers are not affected by the standoff between the Pilots and Airlines.

3. Intense competition from Gulf and domestic operators: As for all European airlines operating on Europe-Asia routes (and, to a lesser extent on Europe-Africa), VA is exposed to competition from the Big Three Gulf carriers (Emirates, Qatar Airlines, Etihad) and Turkish Airlines. All of these airlines attract global traffic flows through connecting flights via their hubs in the Middle East or Turkey, in competition with direct services offered by the likes of VA from Europe. These operators combine lower unit costs with high service quality and have made a significant impact on Europe's long-haul carriers. Virgin faces fierce competition from domestic carriers too, with only two monopoly routes and only eight where it is the leading carrier by seats. British Airways competes with Virgin on 21 of its 29 routes. Simultaneously, upstart incumbents like LCC Norwegian, Joon and the leisure airlines Thomas Cook and Thomson are also locking horns with Virgin Atlantic to gain market share.

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The PESTLE/PESTEL analysis for Virgin Atlantic is presented below:
Political
Economical
1. BREXIT caused political turmoil
2. Ambiguity in future trade policy
3. Government approved new runway at Heathrow
1. British Currency Depreciation
2. Low fuel prices and interest rates
Social
Technological
1. ATC Strikes1. Digital disruption
2. AIR 4 technology
Legal
Environmental
1. Fight between PPU and BALPA1. Adverse weather conditions
2. CO2 emissions
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Detailed PESTLE Analysis of Virgin Atlantic

 

Political

1. Brexit caused Political Turmoil: The year2016 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 has borne fruit and it is expecting new arrangements to be agreed by 2018.

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 only in early 2019, when the new policies are to be rolled out. 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, code share options with Flybe airlines for flights to Heathrow and also with jet Airways for Trans-Atlantic flights.

Economic

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Social

1. ATC Strikes: The year 2015 and early 2016 posed many operational glitches and threats for the airlines industry as a whole due to the large scale strikes by the Air Traffic Controllers and union officials. The Strikes had started in France in mid-2016 citing faulty labour reforms by the Socialist government as the causal reason for the same. In March 2017, the air traffic controllers (ATCs) protested by enforcing a strike for 5 days where there were delays in flight operations from and to Britain, Spain, France, Italy and Switzerland. Air France, Easy Jet and Ryan Air were among the other airlines that were severely affected by these protests. Air France bore the full brunt of it since France was the where the protest originated. A press release cited airlines like Virgin Atlantic, British Airways and Easy Jet had appealed to the European Union to rule in a way such that customers are not affected by the strikes.

Technological

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Legal

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Environmental

This section is available only in the 'Complete Report' on purchase.

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Check out analysis of other relevant companies

References used in Virgin Atlantic Analysis Report

https://virginatlanticannualreport17.com/pdfs/VA-2017-Annual-Report_Full.pdf

https://www.virginatlantic.com/in/en/sustainability/the-big-picture.html

https://www.ibtimes.co.uk/virgin-atlantic-faces-work-rule-pilot-protest-over-christmas-union-recognition-row-1596932

Copyrights and Disclaimer

Virgin Atlantic SWOT and PESTLE analysis has been conducted by Prateek Moroney and reviewed by senior analysts from Barakaat Consulting.

Copyright of Virgin Atlantic SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions and Disclaimer for usage guidelines.