Virgin Atlantic aims for growth, calls for more slots at Heathrow

Virgin Atlantic has called for changes to Heathrow Airport’s slot regime ahead of Heathrow’s expansion. The airline is currently limited to just 30 slots at the London hub, though it hopes with the construction of a third runway to grow this to 160.

Although it is still an estimated seven years away, the third runway at Heathrow is anticipated to increase flight capacity by nearly 60% over the next 30 years, according to TTG Media.

Virgin Atlantic CEO, Shai Weiss, previously outlined a 10-year ambition for the airline to become the UK’s second largest flag carrier after British Airways. With the recent acquisition of FlyBe by Connect Airways, partly owned by Virgin Atlantic, the airline hopes to increase its presence in London, feeding passengers from regional areas onto its longhaul network.

Without Heathrow expansion, however, the airline is constrained in its ability to grow — Virgin Atlantic and its partners Delta and Air France-KLM currently hold just 10% of capacity at Heathrow, paling in comparison to British Airways parent group IAG’s 55%, which it described as having a “stranglehold” at the airport.

“As things stand, International Airlines Group holds more than 55% of all take-off and landing slots at Heathrow, with no other airlines having more than 5% of capacity. One group’s stranglehold on our nation’s hub airport means other airlines do not compete effectively on anything approaching a level playing field, and passengers are paying the price,” Weiss wrote in a letter to the government’s Transport Select Committee.

“Expansion offers a genuine once-in-a-lifetime opportunity to shake up the market in favour of creating strong competition, greater choice and lower fares for consumers and business.”

Virgin Atlantic in post-Brexit Britain

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Though Virgin Atlantic has little control over capacity constraints at Heathrow, the airline is hoping to support its growth through a younger and more streamlined fleet. The airline’s eight 747s and five Airbus A340s will be retired over the next few years, set to be replaced with more efficient A350-1000s, the first of which was recently delivered to the airline.

Although the plan should boost the bottom line, Weiss notes that the state of the global economy and Brexit — which will push up the price of the British Pound — will lead to an increase in the price of jet fuel.

But every cloud has a silver lining: “If there is a global recession… given the competitive market… there could be opportunities, some of the weaker players may not be able to sustain themselves,” said Weiss, suggesting that the fall of rivals could be favourable for the airline.

While Shai was reluctant to name any airline in question, he was likely referring to Norwegian, which has been plagued by hefty losses and high debts. Indeed, just last week the airline announed it would be selling its prized Gatwick slots in exchange for a delay on the repayment of its bonds.

While Virgin Atlantic might hope for reduced competition, it will soon be facing the opposite on some transatlantic routes in the form of JetBlue, who plan to launch routes to London from the US in 2021. 

“We are ready” was Weiss’s bullish response, noting that Virgin Atlantic is confident in its product and the strategy of becoming an airline that is known for its service and ethos. Despite the presence of the new and aggressively cost-conscious player in the transatlantic market, Weiss believes that fares on the route will be determined by the fate of marginal players in the market.