Days of enchanced service at lower prices are over
Saturday, 10 May, 2010
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Virgin Atlantic will pursue a policy of increasing revenues while keeping capacity tightly controlled, according to its chief commercial and financial officer.
Julie Southern told delegates at this year’s GTMC overseas conference in Hong Kong that the days of enhanced product at lower prices were over.
The airline was forced to slash capacity by 15% last year and lost 1,200 staff through voluntary and compulsory redundancy.
Southern said: “We’ve got to wean people off expecting to get more in terms of product and pay less for it. It’s just not economically sustainable.
“We are not the same airline as we were 12 months ago. We had to take a lot of capacity out and that was hard as on many routes we have just one flight.
“We are a 15% smaller airline and that capacity is not going to come back anytime soon."
She added: “Capacity discipline is staying in place.”
When asked whether she felt that there was something fundamentally wrong with the airline model in general, she pointed to excess capacity as one of the chief reasons airlines find it so hard to make profits.
According to IATA, airlines in general had just two profitable years – 2006 and 2007 – in the last 10 years. This year they are on course to lose around $5bn.
She also revealed that Virgin made £3 million last year simply by reconfiguring seats at very little cost to increase leg room – and then charging passengers extra for them.
And she confirmed Virgin had placed orders for new Airbus A330s for 2011 and 2012, which she revealed would have “exciting new product on board”.
She also told delegates: “We are completely committed to working in partnership with all of you.”
Southern said she was “not very optimistic” about the UK’s economic recovery happening before 2012.
“I’m cautious in terms of the outlook for the UK economy though we are starting to see air travel and freight come back it’s only back to 2007 levels. There is a huge way to go.”
Southern added that she saw no prospect of any government scrapping APD in the current economic climate.
Phil Davies
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