(2 of 3)
That, says Branson, is a load of rubbish. For the past two years, Virgin has bitterly opposed the impending AA-BA venture on the grounds that it would reduce competition and push up fares, particularly on the busiest and most lucrative routes, like London–New York City. "As a group, we will fight back as a fourth alliance. It will be a lot smaller, but we will use our collective strength and use quality as a real alternative. As I've long argued with my wife, size isn't everything," Branson says.
Unlike Lady Branson, presumably, airline passengers have considerably more options. But by aligning its carriers, Virgin aims to create an interalliance airline under one broad banner that can offer passengers a network covering Europe, the U.S. and the Pacific. Boasts Branson: "Only on Virgin can passengers fly around the world on one plane." Significantly, the company is linking its loyalty programs so that passengers can earn and redeem miles or points under any of Virgin's frequent-flyer programs.
Because the ownership of the carriers is still separate, Branson has to establish interline agreements to enable flyers to use one ticket and one baggage claim. Last year Virgin America established such an arrangement with Virgin Blue. Further demonstrating the brand's linkages, a swanky new Virgin terminal for its carriers is in the planning stages at Los Angeles International Airport. It will feature the kind of innovative and luxe clubhouse lounges Virgin is known for, with separate tiers for upper class, celebrities, economy class and even one for children.
Virgin is also embarking on an ambitious expansion plan. Virgin America recently announced a $4 billion deal with Airbus for 60 of its 150-seat A320 jets, effectively doubling the fleet's size. This year Virgin America launched service to Toronto and plans to expand further into Canada and Mexico. "We need new routes to put the planes somewhere," says Branson with a laugh. He hopes Honolulu will not be too far behind. The company says Virgin America will become profitable this year. Branson thinks that within four to five years he can grab 7% to 8% of the domestic U.S. market (about the size of Continental before its recently approved merger with United). "Our experience has been that wherever we put a plane in the U.S., we get load factors to be profitable," he says.
At the same time, Virgin is implementing a number of initiatives to create a consistent passenger experience across the airlines. For instance, a one-year crew cabin exchange between Virgin Blue and Virgin America starts in October. In-flight programming and entertainment are also being coordinated to emphasize uniformity. In essence, the hallmarks of Virgin, like the creature comforts it offers (onboard wi-fi, limousine pickup, high-quality food on demand, flat beds, decent legroom, mood lighting), will be translated into a more seamless flying experience. Looking One World, Sky and Star, Virgin Atlantic's CEO Steve Ridgway says, "They'll be powerful. But they won't be popular."
That's something the Virgin honchos are betting on. Flyers love Virgin's irreverence and its position as a 26-year-old upstart as much as they enjoy the neck rubs and in-flight Internet and on-time departures. It's something that Virgin Blue CEO John Borghetti says gave him pause when he was executive general manager at Qantas. "What made me nervous about Virgin when I was at Qantas was that they didn't know the meaning of the word impossible," he says. "That was dangerous."
Indeed, Virgin remains committed to pushing the outer bounds. A proponent of renewable energy, the carrier experimented last year with running jets on biofuels. Then there is Virgin Galactic. While many may view Virgin's pioneering suborbital travel as simply the whimsy of an eccentric billionaire, "space is our first monopoly," cracks Ridgway. Branson warns, "Don't underestimate the halo effect it will have on the brand" or its potential for everyday traveling. Virgin's engineers are working on leveraging Galactic's technology for use in intercontinental flights between the U.K. and Australia, which would shorten the flight time considerably, from 24 to 2.5 hours.
In the hand-to-hand combat that now constitutes airline travel, Virgin sees an advantage in disarming the customer with groovy planes and unexpectedly good service. Virgin's aircraft have been called everything from "multimillion-dollar flying iPods" to "boutique hotels in the air." In June, Virgin Atlantic announced a $70 million partnership with Panasonic to install an in-flight avionics system that will allow passengers the same range of connectivity they have on the ground, not to mention access to live broadcasts of sports and news.