Case Presentation on VIRGIN ATLANTIC AIRWAYS TEN YEARS AFTER

Fore School of Management Presented By: Anamika 82086 Abhishek 82085 Shrikant 82078 Varun 82090

Case Highlights y Introduction y Case Objectives y The Airline Industry y Virgin Atlantic Airways -Background and History y Major Events and Areas of Concerns y How Virgin Atlantic Airways Addressed Issues y New Service Development y Service Blue Printing ± Virgin Atlantic Airways y Service Blue Printing ± British Airways y Virgin Atlantic Airways vs British Airways y Conclusion .

this man with his sheer hard work. starting from an initial business of mail order records in the 70¶s. a highly enterprising and a dynamic entrepreneur who dared to dream big. led by a great leader. 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.Introduction This case talks about Richard Branson. determination and foresightedness took Virgin to great heights of setting up a fully fledged Airlines Travel Company in 1994-95 . who single handedly created a strong brand named ³Virgin´. Richard Branson. It is quite intimidating to learn about Richard Branson.

Case Objectives y Understand the key strategies and core competencies of VAA. segmentation and positioning and brand image y Demonstrate the delivery of customer value y Illustrate service positioning as a competitive strategy y How Virgin¶s innovative ideas and newer concepts helped in achieving best service in the cheapest price y To demonstrate the delivery of customer value y To illustrate service positioning as a competitive strategy . its target market.

in order to sell air services at varying prices simultaneously to different segments.THE AIRLINE INDUSTRY Classified into four major categories: y International y National y Regional y Cargo y Most airlines use differentiated pricing. . Between 1990 to 2000. y The airlines industry saw losses of $8 billion in 1992. industry growth increased by 7% per year. y 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 y The airline industry faced its biggest challenge and crisis in the year 1990¶s global recession and the Gulf War.

United Kingdom. renamed as VAA later by President Richard Branson y Virgin Atlantic is the second largest British Long Haul international airline y Its headquarters are located in Crawley. named British Atlantic Airways (BAA). England.Virgin Atlantic Airways Background y In 1982. Virgin Atlantic operates a fleet of 38 aircrafts: 13 Boeing 747s and 25 Airbus A340. Randolph Fields and Alan Hellary set out to start a new airline. . with 6 orders of Airbus A380 and 23 orders of Boeing 787 to be delivered in 2013 and 2011 respectively.

UAL Corporation. Virgin did not serve enough destinations. US and Euro zone affected Virgin Atlantic because its targeted customers resided in these countries. This could impact Virgin Atlantic s margins as it is mostly reliant on air freight business. Addressing people perception of Virgin Atlantic as a Cheap and Cheerful airline .Areas of Concerns y Lack of scale: The Company operated in 27 destinations whereas. Consistency in maintaining a high service quality. British Airways. Due to the rising oil prices globally. Lufthansa. Cathay Pacific Airways. Issues related to the age of its fleet and punctuality problems. the prices of aviation fuel had increased substantially. Retaining and attracting customers. Maintaining and sustaining high innovation levels. Continental Airlines. BMI. Tough competition from 9 major competitors. Delta Airlines and Japan Airlines. its top y y y y y y y y competitors British Airways and Thai Airways International operated in 148 and 600 destinations worldwide. An economic slowdown in the UK. AMR Corporation. .

On Time Initiative introduced where cabin crew were to shut doors exactly 10 mins before departure time to avoid delays. a B747-400 and A340s. In 1994 it also added flights to Hongkong and San Francisco. Chicago. It decided to expand its fleet to 18 planes. safety seats. Introduction of new Innovative services like. It also proposed to add new routes.How Virgin Atlantic Airways Addressed Issues y y y y y y y y y y y y y y y Added newer destination. changing facilities and baby food. Virgin focused on the corporate segment and worked towards establishing itself as a sophisticated. Introduction of the frequent flyer program Beat the perception of being a Cheap and Cheerful airline . It was in the process of adding another B747-400 and a fourth A 340. First airline to offer automatic defibrillators and a trained staff to assist cardiac arrest victims. Installation of in flight entertainment system. business class long haul airline. Served special meals to infants and children. All Nippon Airways (ANA). Auckland. In September 2006. Newer fleet: On its 10th anniversary. which allows Virgin Atlantic passengers to fly to Japan on ANA s domestic services. on-board bar for the upper class. Singapore. Free Limousine service Inauguration of the Gatwick Upper class lounge in 1990 and the Upper class lounge at the Heathrow in 1993. Washington DC. For any delay in flight a personalized fax of apology was sent from Richard Branson himself. Virgin had 8 B747 200s. Special Service to its Upper Class Travelers. Virgin Atlantic announced that it has teamed up with one of the world s ten largest airlines. Economy class within a week s time. Provided children s channel. . Sydney and Johannesburg. Initiated a beauty therapist service/ tailor service. All complaints from the Upper class were handled within 24 hrs. Electronically operated 54 inch seat and 55 degree recline.

Post introduction evaluation: at this point in time. New service strategy development: virgin had already covered customers who wanted comfort. 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. marketing mix variables on the basis of actual market response to the offerings.New Service Development y y y y y y y y y y The steps of the process are: Business strategy development or review: Virgins main focus was on a leisure travel.e. Newark. information gathered during commercialization of the service can be reviewed and changes can be made to the delivery process. Therefore. service class and small mid size business owners would be clientele that Virgin can look for. But considering the increase in oil prices and deregulation in airline industry. Tokyo and Boston. Virgin would be benefitted by getting a regular business at low cost. All three places are typical industrial and business hubs. the service goes live and is introduced to the market place. Customer s expectations: For an airline service the basic customer expectation would encompass y y On time flights Cheap air travel . Virgin was planning to buy some new aircrafts and discard the existing ones. They must now focus on customers who just want to travel at the cheapest cost possible. Virgin can approach big companies for business. In order to counter that such a service would be very much viable at three most frequent routs i. Virgin can come up with something which reduces their cost and also affordable to there customers. Market testing: online surveys/questionnaires/on board surveys can be done in order to find out the customer needs and wants. Such people would be most interested in cheap travel. virgin had to do something different. 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. They can make profits on the other paid services. Competition also demanded to come up with a service which can lead to reduction in their costs. Commercialization: at this stage. In order to stand at such turbulent situation. leisure and sophistication.

The front office. called by some the front stage. y A simple service blueprint may involve two layers. a front office and a back office. Activities in the front office may include greeting with the customer. It involves layers of steps. is those parts of the service process that are visible to the customer. or back stage. taking the customer s order. etc. . the front office is separated from the back office by a line of visibility . A service blueprint shows the interaction of various elements of a service process. with each layer representing a different proximity to the customer or different functional areas.Service Blue Printing ± Virgin Atlantic Airways y Service blueprinting is a special type of process flowcharting. involves those parts of the process that are not visible to the customer. operating on the customer s ingrown toenail. The back office. In a service blueprint.

Service Blue Printing ± Virgin Atlantic Airways .

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. immediate assistance should be provided. In case of any loss of baggage or delay in delivery. it is important to inform the customer about the right counter and correct path to follow in order to speed up the process. it becomes necessary that the customer should be assisted at each step till the time he/she has boarded the flight. 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. while checking out it is important to assist the customer with baggage handling. It would help in saving time and the customer can board the flight without facing any complexities. Security Check-In and Baggage Handling ± At the time of boarding the flight. thus the airline should ensure availability of tickets at different time slots in order to be able to serve the customer. drinks and sleeping arrangements for longer duration flights becomes an important aspect for a customer. Checking-Out ± Lastly. thus the airline staff and crew should ensure complete assistance and support to each customer boarding the flight. resources and future sales. Services Offered While Flying ± Services like meals. Landing and Baggage Claim ± While landing and claiming the baggage. Security check and baggage check-in procedure are the most time consuming and cannot be escaped or shortened. snacks. Standardization can only be done in selected steps which can make the entire experience more easy and less time consuming for a customer.Service Blue Printing ± Virgin Atlantic Airways y y y y y y y y y y y y y y y y y y y y 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. 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. booking a cab for the desired location from the airport and provide correct information about the location he/she is planning to reach. 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 .

y Information: Timely information was passed on to the customers on flight delays and cancellations. y Upper Class: within 24hrs.POTENTIAL MEASURES OF PERFORMANCE (SOFT & HARD STANDARDS) y SOFT STANDARDS (QUALITATIVE) y Management: A transparent feedback system Richard Branson was always y y y y accessible to all its employees at any time of the day Employees: Informal but caring. y Economy Class: within a Week. HARD STANDARDS (QUANTITATIVE) Complaints: All the complaints were handled within a stipulated time and appropriate action were incorporated. Dynamic Business Culture: Encouraged staff initiation and provided means to implement them. young vibrant interested courteous and willing to go out of his way to help customers. . y 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 was also voted as the most child-friendly airline. BA s strong key messages are consistency. service and price. Undated). Airline Fleets: BAA enjoyed a fleet of 234 airplanes and had plans to adding another 63 airplanes. and the organization enjoys a good reputation and is renowned for the very high standards of customer service and efficiency.Virgin Atlantic Airways vs British Airways y y y y y y y y y y Landing Preference: BAA enjoyed preferential landing slots at Heathrow Airport whereas Virgin lacked this benefit. and thanks to 280 airports within Europe there exist a business opportunity for both BAA and VAA. with BA ranking in the 2nd place (JustTheFlight. . 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. Virgin Atlantic differentiation is based on 3 strong characteristics: value. Partners & Alliances. reliability and quality. Undated). Brand Image and Name: BAA carries a stronger brand name and image. Market Opportunities: Since the air services in EU were fully de regulated and liberalized. and it was recently was voted No 1 for having the best online reputation (CreativeMatch. Whereas Virgin had only 38 aircrafts. Therefore Virgin Atlantic should focus in its target market and avoid competing larger firms like BAA. Reachability: BA had a high coverage of 150 destinations in 69 countries unlike Virgin which only catered to selected destinations. 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. 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.

Virgin should focus in a specific market niche or specific routes to obtain value other than price and survive the competition. 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). . however.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. airline industry belongs to slow cycle markets. In general. As a result. due to relatively smaller capital and operations of some firms like Virgin.

Thank You .

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