Sayantan_Virgin Atlantic Airways

Sayantan NandyIIM Lucknow

Virgin Atlantic Airways - Brand Extension Analysis

Genesis of the Virgin Group Diversification into the Airlines Industry Airlines Industry Overview – Global and UK Key Metrics related to the UK Airlines Industry Virgin Atlantic Airways

Market Share Key Performance Indicators

4 P Analysis of Virgin Atlantic Market Segmentation Competitive Frame of Reference

Contents

The driving force

Sir Richard Branson

Genesis of the Virgin Group Virgin Group Ltd. is a British multinational

venture capital conglomerate Started in 1970 by Richard Branson and

Nick Powell Core business areas are travel,

entertainment and lifestyle Other ventures include financial services,

transport, healthcare, food and drink, media and telecommunications

Virgin employs more than 50,000 people around the world, operating in over 50 countries

Virgin's businesses consist of more than 400 companies worldwide.

The group firm recorded global branded revenues of £15bn ($24bn) recently

Genesis of the Virgin Group 1970 The Virgin brand makes its

debut as a retailer selling records by post, undercutting high-street retailers.

The name originated from a colleague's remark that everyone involved was a novice: "We're complete virgins at business.“

1973 Birth of the Virgin record label (later sold to EMI Group)

1981 Launch of Virgin Games 1984 Branson establishes one of

his most successful and high-profile ventures with the Virgin Atlantic airlines

Brand Extension

Ownership Structure Although Richard Branson retains

complete ownership and control of the Virgin Brand, the commercial set-up of companies using it is varied and complex.

Each of the companies operating under the Virgin brand is a separate entity, with Branson completely owning some and holding minority or majority stakes in others.

Virgin Atlantic is 51% owned by the Virgin Group and 49% owned by Delta Airlines

On 20 December 1999 Richard Branson signed an agreement to sell a 49% stake of Virgin Atlantic to Singapore Airlines to form a unique global partnership, later sold to Delta Airlines in 2012

About Virgin Atlantic Headquartered in Crawley, West Sussex,

England Main bases at London-Heathrow and

London-Gatwick and secondary base at Manchester

Virgin Atlantic offers three classes of travel - Upper class, Premium Economy and Economy, all with award-winning inflight entertainment

Virgin Atlantic Airways has now become Britain’s second largest carrier

Virgin Atlantic currently has a fleet of 38 aircraft, which includes thirteen Boeing 747s and six Airbus 340-300s and nineteen Airbus A340-600s

The Airlines Industry

Overview of the Airlines Industry

2010 2011 2012 2013 2014

500,000.00

550,000.00

600,000.00

650,000.00

700,000.00

750,000.00

800,000.00

Global Market Size

year

Glo

bal M

ark

et

siz

e (

US

$ m

n)

20102011

20122013

2014

25,000.0025,500.0026,000.0026,500.0027,000.0027,500.0028,000.0028,500.0029,000.0029,500.0030,000.00

UK Market Size

year

uk m

ark

et

siz

e (

mn

p

ou

nd

s)

As is evident from the above figures, both the markets are increasing in size with the global airlines market increasing at a CAGR of 6.91% and the UK market increasing at a slower rate of 2.57% over the past five years

Key Metrics: UK Airlines Industry

The figures tell us about the positive trends in the UK Airlines industry where the Airline Passenger Traffic (measured in million passenger-kilometers) and passengers carried (in ‘000s) are both on the rise consistently over the past five years

2010 2011 2012 2013 2014200,000.00

210,000.00

220,000.00

230,000.00

240,000.00

250,000.00

260,000.00

270,000.00

Airline Passenger Traffi c

Year

Air

lin

e P

assen

ger

Tra

ffic

(mn

p

assen

ger

-kilom

etr

es)

2010 2011 2012 2013 201490,000.00

95,000.00

100,000.00

105,000.00

110,000.00

115,000.00

120,000.00

125,000.00

Scheduled Airlines: Pas-sengers Carried

Year

Passen

gers

carr

ied

(n '000)

Key Metrics: UK Airlines Industry

But a worrying trend also emerges that the passenger load factor (defined as a measure of the capacity utilization of airlines and is generally used to assess how efficiently an operator "fills seats" and generates fare revenue) have been fluctuating over the years and have gone downwards since 2011. This can be attributed to the increased number of players in the market and the subsequent increase in competition.

2010 2011 2012 2013 2014

75.1

75.3

74.5

74.274.3

Scheduled Airlines: Passenger Load Factor

Year

Pass

en

ger

Load

Fact

or

(%)

Virgin Atlantic Airlines – Soaring to new heights

Virgin Atlantic: Market Share

Even though the global market share has remained constant over the years, the market share of Virgin Atlantic in Western Europe and UK – the main target markets have shown an appreciable rise over the last five years.

2009 2010 2011 2012 2013 2014 20150

0.1

0.2

0.3

0.4

0.5

0.60.5 0.5 0.5 0.5 0.5

Market Share (World)

Year

Glo

bal M

ark

et

Sh

are

(%

)

2009 2010 2011 2012 2013 2014 20150

0.20.40.60.8

11.21.41.61.8

2

1.51.6

1.7 1.71.8

Market Share (Western Europe)

Year

Mark

et

Sh

are

(%

)

2009 2010 2011 2012 2013 2014 20156

6.5

7

7.5

8

8.5

7.17.3

7.67.8

8

Market Share (UK)

Year

Mark

et

Sh

are

(%

)

Virgin Atlantic: Key Performance Indicators

Virgin Atlantic does not operate in the low cost segment of the airline industry. Therefore the prices it charges its customers is on the higher side and has seen a steady growth form 556$ to 648$ per passenger from 2010 to 2014, mostly on account of higher Aviation Turbine Fuel prices.Virgin has done well on an important KPI of passengers travelled which has increased at a CAGR of 3.18% over the past five years.

2010 2011 2012 2013 2014400

450

500

550

600

650

700

Average Price Per Passenger

year

Pri

ce (

US

$)

2010 2011 2012 2013 20144,800.00

5,000.00

5,200.00

5,400.00

5,600.00

5,800.00

6,000.00

6,200.00

Number of Passengers Travelled

year

Nu

mb

er

of

peop

le (

In '0

00

.)

Product Flights to 35 destinations worldwide Many intangible services provided on board Virgin has set the standard for excellent

customer care Meals on board Entertainment on board (films, magazines,

music and games) Travel Classes: Economy, Premium Economy 

and the Upper Class Has a frequent flyer program called ‘Flying

Club’ Virgin Atlantic also provides cargo transportation

Simplistic and reliable service, with added flexibility should the need arise

The cargo category offerings are classified as: General Cargo – the basic offering Must Ride – for urgent cargo VEX – express courier product Pets Transportation – for cats, dogs etc.

Price Travel Classes: Economy, Premium Economy 

and the Upper Class Special Assistance Program at higher prices –

customized meals, chauffeured transportation Offers bundled Virgin Holiday Package Provides high and low seasonal prices Allows buying tickets in lieu of air miles Focus on keeping prices competitive as an

airline seat is a perishable product However, Virgin's USP is the service

rather than the price Communicates a message that pretty much

says ‘price is no object as long as the customer service is of a high standard’ – markets well with people who enjoy luxury and a high standard of living

Place Location

Head office is in Crawley, West Sussex, near Gatwick Airport

Virgin Atlantic's operating bases is Gatwick Airport, Heathrow Airport and Manchester Airport

Flies you to 35 worldwide destinations

Distribution Buy tickets online directly from airline’s

website www.virgin-atlantic.com – offers lowest price guarantee

Call the customer service line at 800-821-5438 to book ticket

Can opt to hire a registered travel agent or tour operator to book their flight

Promotion Promoted as “A small airline with a big

personality” Consistency in Virgin Atlantic communications

has come through the cultivation of an inimitable brand voice and iconic visual identity - luxury, glamour, sophistication and use of the red color

Different types of promotion used to advertise their special offers to attract new customers

Promotion offers such as Reward Seat Sales and Scorching Summer Sales at discounted prices

Launched the 'Still Red Hot' campaign to celebrate the brand's 25th anniversary

Important campaigns: "Your airline’s either got it or it hasn't“, "Flying in the face of ordinary“ and “Looking for Linda”

Received the 2012 Daily Award for Best Corporate PR Team

Promotions of other Virgin Group brands indirectly contribute to the popularity of Virgin Atlantic

How does Virgin Atlantic segment the market?

Upper Class Cabin Premium Economy Cabin Economy Class Cabin Demographic segmentation of customers is done by Virgin Atlantic

The company service prices are above industry average, so Virgin Atlantic mainly targets customer segments that are above average in terms of financial well-being

Virgin Atlantic has different seating classes targeted towards 3 different segments Upper Class (the airline’s business class) customer profile: males between 35 to 45

years, earn more than $75,000 a year Premium Economy used evenly by business and vacation travelers, typically

around 40 years. Offers service aimed at the cost conscious business traveler who for budgetary reasons travels economy but still requires extra space in which to work or relax

Economy Class is the basic offering which aims to give maximum value for money to customers

Analyzing the competitive frame of reference

Virgin Atlantic: Competitors (UK)

Main competitors are:British Airways (19.1%)Thomson Airways (6.2%)easyJet (5.7%)Ryanair (4%)

UK Airline Industry (2014)

British AirwaysVirgin AtlanticThomsoneasyJetRyanairThomas CookMonarchFlybeDartOthers

Virgin Atlantic: Competitors (Global)

Virgin Atlantic competes on all of its routes with the industry's top national carriers British Airways, American Airlines, Continental, Delta, United on transatlantic

routes British Airways and South African Airlines to South Africa British Airways, All Nippon Airways, Cathay Pacific, Japan Airlines to the Far East British Airways to Delhi

Airlines Virgin Atlantic British AirwaysContinental

AirlinesAmerican Airlines Delta Air Lines

Founded 1984 1924 1934 1930 1928

Parent Company Virgin Group British Airways plc Continental AG AMR Corporation Delta Air Lines, Inc.

Head Office Crawley, England London, United Kingdom Houston, Texas Fort Worth, Texas Atlanta, Georgia

HubsLondon Heathrow

Airport, London Gatwick Airport

London Heathrow Airport, London Gatwick

Airport

George Bush Intercontinental Airport

(Houston)

Dallas-Fort Worth International Airport, Miami International

Airport

Hartsfield-Jackson Atlanta International

Airport

Alliance ANA Oneworld SkyTeam Oneworld SkyTeam

Number of Aircrafts 38 235 367 653 443

Destinations 35 222 292 158 332

Employment Over 9000 42,755 43,770 86,000 51,300

Virgin Atlantic: Perceptual MapHigh Quality Air Travel

Low Quality Air Travel

High Cost Air Travel

Low Cost Air Travel

Points of Parity

On-time travel to its destinations across the globe A good safety record emphasizing the reliability of air travel In-flight WIFI, touchscreen seatback entertainment, and full service meals

available with roomy cabins General cleanliness of the aircrafts Hygienic meals served on-board Virgin considers the crew as the guardians of the brand onboard the aircraft

resulting in smartly clad and well trained air-stewards in the signature red uniform, representing a uniform brand identity

Has a frequent flyer program Possible to redeem tickets in lieu of accumulated air-miles Has code sharing and seat sharing agreements with other carriers

Points of Difference Virgin Atlantic believes in differentiating itself from the competition through service

The company believes the customer is interested in the entire flying experience and not just buying space on an airplane

‘What we can offer that no one else can is that truly unique Virgin Atlantic experience, and that's what people buy in to.‘ - Simon Lloyd, Marketing Director

Notable service offerings: First airline to offer business class passengers individual TVs in 1989 First airline to install interactive entertainment with individual TVs in all

classes First airline to equip its fleet with Automatic External Defibrillators (AEDs) in

1990 One of the first airlines to introduce the Boeing Dreamliner in its fleet Average age of aircrafts is currently 8.4 years, which makes it the operators

of one of the youngest fleets in the business Longest bed of any airline’s business class product Seductive mood lighting in all classes for better cabin ambience Thoughtfully planned cabin layout to increase the whole perception of space Telemedical device (Tempus) on all its fleet for on board medical

emergencies Maverick owner Sir Richard Branson’s very public involvement in the company

gives it a lot of free publicity

ReferencesWelcome to Passport. (n.d.). Retrieved July 3, 2015, from http://www.portal.euromonitor.com/portal/statistics/tab

The history of Virgin - Virgin.com. (n.d.). Retrieved July 3, 2015, from http://www.virgin.com/time-machine

Financial results | Virgin Atlantic. (n.d.). Retrieved July 3, 2015, from http://www.virgin-atlantic.com/in/en/footer/media-centre/press-releases/financial-results.html

Virgin Atlantic Wiki. (n.d.). Retrieved July 3, 2015, from https://en.wikipedia.org/wiki/Virgin_Atlantic

Richard Branson Wiki. (n.d.). Retrieved July 3, 2015, from https://en.wikipedia.org/wiki/Richard_Branson