VIRGIN ATLANTIC AIRWAYS-

TEN YEARS AFTER

Anand K V
Anand Nambiar
Anand Sivadas
Ankit Roy
Surya Murali
Vidhi Gupta
Case Highlights
• Introduction
• Case Objectives
• The Airline Industry
• Virgin Atlantic Airways -Background and History
• Major Events and Areas of Concerns
• How Virgin Atlantic Airways Addressed Issues
• New Service Development
• Service Blue Printing – Virgin Atlantic Airways
• Service Blue Printing – British Airways
• Virgin Atlantic Airways vs British Airways
• Conclusion
 Introduction
This case talks about Richard Branson, a highly enterprising and a
dynamic entrepreneur who dared to dream big. The case
highlights the successful journey of and the emergence of Virgin
Atlantic Airlines as one of Britain’s second largest long haul
airlines specializing in quality and innovation, led by a great
leader, Richard Branson. It is quite intimidating to learn about
Richard Branson, who single handedly created a strong brand
named “Virgin”, starting from an initial business of mail order
records in the 70’s, this man with his sheer hard work,
determination and foresightedness took Virgin to great heights of
setting up a fully fledged Airlines Travel Company in 1994-95
 Case Objectives
• Understand the key strategies and core competencies of VAA, its

target market, segmentation and positioning and brand image

• Demonstrate the delivery of customer value

• Illustrate service positioning as a competitive strategy

• How Virgin’s innovative ideas and newer concepts helped in

achieving best service in the cheapest price

• To demonstrate the delivery of customer value

• To illustrate service positioning as a competitive strategy

 THE AIRLINE INDUSTRY
Classified into four major categories:
• International
• National
• Regional
• Cargo

• Most airlines use differentiated pricing, in order to sell air services at varying prices
simultaneously to different segments.
• 1978 saw the deregulation of the US air transport which resulted in lesser government rules
and intervention leading to increasing competition among the American airlines
• The airline industry faced its biggest challenge and crisis in the year 1990’s global
recession and the Gulf War.
• The airlines industry saw losses of $8 billion in 1992. Between 1990 to 2000, industry
growth increased by 7% per year.
Virgin Atlantic Airways -
Background
•
In 1982, Randolph Fields and Alan Hellary set out to start a
new airline, named British Atlantic Airways (BAA), renamed as
VAA later by President Richard Branson
• Virgin Atlantic is the second largest British Long Haul
international airline
• Its headquarters are located in Crawley, England, United
Kingdom. Virgin Atlantic operates a fleet of 38 aircrafts: 13
Boeing 747s and 25 Airbus A340, with 6 orders of Airbus A380
and 23 orders of Boeing 787 to be delivered in 2013 and 2011
respectively.
Areas of Concerns
• Lack of scale: The Company operated in 27 destinations whereas, its
top competitors British Airways and Thai Airways International operated
in 148 and 600 destinations worldwide. Virgin did not serve enough
destinations.
• Due to the rising oil prices globally, the prices of aviation fuel had
increased substantially. This could impact Virgin Atlantic’s margins as it
is mostly reliant on air freight business.
• An economic slowdown in the UK, US and Euro zone affected Virgin
Atlantic because its targeted customers resided in these countries.
• Tough competition from 9 major competitors; AMR Corporation, British
Airways, Cathay Pacific Airways, Continental Airlines, UAL Corporation,
BMI, Lufthansa, Delta Airlines and Japan Airlines.
• Consistency in maintaining a high service quality.
• Addressing people perception of Virgin Atlantic as a “Cheap and
Cheerful airline”.
• Issues related to the age of its fleet and punctuality problems.
• Maintaining and sustaining high innovation levels.
• Retaining and attracting customers.
How Virgin Atlantic Airways
Addressed Issues
• Added newer destination; In 1994 it also added flights to Hongkong and San Francisco. In September
2006, Virgin Atlantic announced that it has teamed up with one of the world’s ten largest airlines, All Nippon
Airways (ANA), which allows Virgin Atlantic passengers to fly to Japan on ANA’s domestic services. It also
proposed to add new routes; Washington DC, Chicago, Auckland, Singapore, Sydney and Johannesburg.
• Newer fleet: On its 10th anniversary, Virgin had 8 B747 – 200s, a B747-400 and A340s. It was in the
process of adding another B747-400 and a fourth A 340. It decided to expand its fleet to 18 planes.
• On Time Initiative introduced where cabin crew were to shut doors exactly 10 mins before departure time to
avoid delays.
• All complaints from the Upper class were handled within 24 hrs, Economy class within a week’s time. For
any delay in flight a personalized fax of apology was sent from Richard Branson himself.
• Introduction of new Innovative services like;
• Served special meals to infants and children. Provided children’s channel, safety seats, changing facilities
and baby food.
• Installation of in flight entertainment system.
• Initiated a beauty therapist service/ tailor service.
• First airline to offer automatic defibrillators and a trained staff to assist cardiac arrest victims.
• Introduction of the frequent flyer program
• Beat the perception of being a “Cheap and Cheerful airline”; Virgin focused on the corporate segment and
worked towards establishing itself as a sophisticated, business class long haul airline.
• Special Service to its Upper Class Travelers;
• Free Limousine service
• Inauguration of the Gatwick Upper class lounge in 1990 and the Upper class lounge at the Heathrow in
1993.
• Electronically operated 54 inch seat and 55 degree recline, on-board bar for the upper class.
New Service Development
• The steps of the process are:
• Business strategy development or review: Virgins main focus was on a leisure travel. But considering the increase in oil
prices and deregulation in airline industry, virgin had to do something different. In order to stand at such turbulent situation,
Virgin can come up with something which reduces their cost and also affordable to there customers.
• New service strategy development: virgin had already covered customers who wanted comfort, leisure and sophistication.
They must now focus on customers who just want to travel at the cheapest cost possible. Competition also demanded to come
up with a service which can lead to reduction in their costs.
• Idea generation: start with a no frill airline. In this type of service all the facilities of Virgin Atlantic would be available but only
after paying for it.
• Business analysis: cost and competition were the two main factors which were leading to losses for the company. In order to
counter that such a service would be very much viable at three most frequent routs i.e. Newark, Tokyo and Boston. All three
places are typical industrial and business hubs. Therefore, service class and small mid size business owners would be clientele
that Virgin can look for. Such people would be most interested in cheap travel. Virgin would be benefitted by getting a regular
business at low cost. They can make profits on the other paid services. Virgin was planning to buy some new aircrafts and
discard the existing ones, such discarded planes can be used to for there NO FRILL AIRLINE OR VIRGIN BLUE
• Service development and testing: testing can be done by offering cheap tickets for few days on such routs.
• Market testing: online surveys/questionnaires/on board surveys can be done in order to find out the customer needs and
wants.
• Commercialization: at this stage, the service goes live and is introduced to the market place. Virgin can approach big
companies for business.
• Post introduction evaluation: at this point in time, information gathered during commercialization of the service can be
reviewed and changes can be made to the delivery process, marketing mix variables on the basis of actual market response to
the offerings.
• Customer’s expectations: For an airline service the basic customer expectation would encompass
• On time flights
• Cheap air travel
Service Blue Printing – Virgin
Atlantic
•
Airways
Service blueprinting is a special type of process flowcharting. It
involves layers of steps, with each layer representing a
different proximity to the customer or different functional areas.
A service blueprint shows the interaction of various elements of
a service process.
• A simple service blueprint may involve two layers, a “front
office” and a “back office.” The front office, called by some the
“front stage,” is those parts of the service process that are
“visible” to the customer. Activities in the front office may
include greeting with the customer, taking the customer’s order,
operating on the customer’s ingrown toenail, etc. The back
office, or “back stage,” involves those parts of the process that
are not “visible” to the customer. In a service blueprint, the front
office is separated from the back office by a “line of visibility”.
Service Blue Printing – Virgin
Atlantic Airways
Service Blue Printing – Virgin
Atlantic Airways
• STEPS ABOVE THE LINE OF VISIBILITY AND THEIR IMPORTANCE FOR A CUSTOMER
• Reservation and Payment – The customer needs tickets as per their preference of date and time of travel, thus the airline should ensure
availability of tickets at different time slots in order to be able to serve the customer.
• Security Check-In and Baggage Handling – At the time of boarding the flight, it becomes necessary that the customer should be assisted
at each step till the time he/she has boarded the flight. Security check and baggage check-in procedure are the most time consuming and
cannot be escaped or shortened, thus the airline staff and crew should ensure complete assistance and support to each customer boarding
the flight.
• Boarding Flight – The air hostesses play a critical role here by allocating right seats to each customer and ensure that they have
comfortable settled in the air craft.
• Services Offered While Flying – Services like meals, snacks, drinks and sleeping arrangements for longer duration flights becomes an
important aspect for a customer.
• Landing and Baggage Claim – While landing and claiming the baggage, it is important to inform the customer about the right counter and
correct path to follow in order to speed up the process. In case of any loss of baggage or delay in delivery, immediate assistance should be
provided.
• Checking-Out – Lastly, while checking out it is important to assist the customer with baggage handling, booking a cab for the desired
location from the airport and provide correct information about the location he/she is planning to reach.
• Standardization can only be done in selected steps which can make the entire experience more easy and less time consuming for a
customer. It would help in saving time and the customer can board the flight without facing any complexities. Some steps where
standardization can be applied are:-
• Reservation and Payment System
• Security Check-In and Baggage Handling
• Landing and Baggage Claim
• Checking-Out
• POTENTIAL FALL POINTS
• Fall points are areas where the company (Virgin Atlantic Airways) needs to work on in order to improvise their level of service and provide
satisfaction to the customer upon usage of a service. Fall points can occur at any point during the entire air travel experience and the
company needs to ensure that such fall points should not create trouble for a customer else it may lead to loss of time, resources and future
sales. Some of the potential fall points could be:-
• Delay in delivery of tickets or wrong printing on the tickets
• Promising the desired seats and not providing them at the time of travel
• Long queues at the baggage check-in points
• Long waiting after check-in procedure is complete
• Extra time consumed while taking off and landing due to air traffic or other technical errors
• Long waiting at the time of baggage claim and check-out
POTENTIAL MEASURES OF
PERFORMANCE (SOFT & HARD
STANDARDS)
• SOFT STANDARDS (QUALITATIVE)
• Management: A transparent feedback system “ Richard Branson
was always accessible to all its employees at any time of the day”
• Employees: Informal but caring, young vibrant interested courteous
and willing to go out of his way to help customers.
• Dynamic Business Culture: Encouraged staff initiation and provided
means to implement them.
• HARD STANDARDS (QUANTITATIVE)
• Complaints: All the complaints were handled within a stipulated time
and appropriate action were incorporated.
• Upper Class: within 24hrs.
• Economy Class: within a Week.
• Information: Timely information was passed on to the customers on
flight delays and cancellations.
• Upper class Lounge: A world class lounge facilities was provided to
its passengers for relaxing & giving them a unique experience to fly
with Virgin Atlantic.
Service Blue Printing – British
Airways
Virgin Atlantic Airways vs
British Airways
•
•
Landing Preference: BAA enjoyed preferential landing slots at Heathrow Airport whereas Virgin lacked this benefit.
The Upper Club section on BA 747: Virgin has full Upper class and half premium economy upstairs on their jumbos while BA
has just Club.
• Reachability: BA had a high coverage of 150 destinations in 69 countries unlike Virgin which only catered to selected
destinations.
• Market Opportunities: Since the air services in EU were fully de regulated and liberalized, and thanks to 280 airports within
Europe there exist a business opportunity for both BAA and VAA.
• Airline Fleets: BAA enjoyed a fleet of 234 airplanes and had plans to adding another 63 airplanes. Whereas Virgin had only 38
aircrafts.
• Brand Image and Name: BAA carries a stronger brand name and image. It is the largest airline and flag carrier of UK and for
sure the size and scale of BAA puts it in a competitive advantage over Virgin Atlantic Airline which is the second largest long
haul airline in UK.
• Partners & Alliances, Franchising and Low Cost Carriers
• Marketing Strategy
• Technological Innovations

• It can be interpreted that the rivalry between BA & Virgin is relatively insignificant although strategic actions of Virgin may
directly and significantly threat the BAA market & could spark retaliation in the determent of relatively small firm. Therefore
Virgin Atlantic should focus in its target market and avoid competing larger firms like BAA. BA’s strong key messages are
consistency, reliability and quality, and the organization enjoys a good reputation and is renowned for the very high standards
of customer service and efficiency. Virgin Atlantic differentiation is based on 3 strong characteristics: value, service and price,
and it was recently was voted No 1 for having the best online reputation (CreativeMatch, Undated). Virgin was also voted as the
most child-friendly airline, with BA ranking in the 2nd place (JustTheFlight, Undated).
Conclusion
As studied above we can conclude that Virgin Atlantic airways is
situated in standard cycle markets where in its competitive
advantage is moderately shielded from imitation. In general,
airline industry belongs to slow cycle markets, however, due to
relatively smaller capital and operations of some firms like
Virgin, companies within this industry are unable to assure their
long term above average returns because they are relatively
vulnerable to general environment (Low lobbing power) &
relatively unsecured to industry forces ( potential entrants or
larger competitors predations). As a result, Virgin should focus
in a specific market niche or specific routes to obtain value
other than price and survive the competition.
Thank You