| Journal: TWUK | Section: |
| Title: | Issue Date: 19/06/00 |
| Author: | Page Number: 8 |
| Copyright: Other |
Analysis
Only the lonely: Virgin has steadfastly refused to join an alliance but may now be willing to talk to other airlinesIs not-so-shy Virgin thinking of joining the alliance party?
Virgin Atlantic chairman Sir Richard Branson has stubbornly maintained his airline’s independence. But is his stance softening? Paul Norris reports
FOR A man who likes to party harder than most, Virgin Atlantic chairman Sir Richard Branson remains vehemently opposed to joining the latest airline get-togethers.He has sold almost half his airline to Singapore Airlines but refuses to join in the fun at SIA’s Star Alliance.
There are huge ambitions to crack the financial goldmine of the US domestic market but he won’t contemplate a full global alliance with the likes of Star Alliance founder United Airlines. And he remains fiercely critical of governments which back the growing alliances of the world’s major carriers.
His UK rivals British Airways and British Midland, on the other hand, are busy signing deals with a range of carriers. BA is expanding its Oneworld alliance and wants a global partnership with KLM/ Northwest Airlines, while Sir Michael Bishop’s airline joins Star Alliance next month.
Can it be that Sir Richard’s business sense is more acute than the others and his role of an independent niche airline is the profitable way to fly? He claims it is.
Sir Richard points out that Virgin Atlantic made a £100m profit in the year to April 1999 – the last available figures. And he naturally mentions that deadly rival BA turned in a loss of £244m in the last financial year, despite forming Oneworld.
But analyst Chris Tarry of Commerzbank said it is essential for Virgin to form an alliance with a strong North American partner. “Virgin needs a partner in the US, Branson recognises this,” said Tarry.
He added that Virgin joining Star Alliance is a possibility. But that will need a change of heart from Sir Richard.
Sir Richard’s decision to sell 49% of Virgin Atlantic to new Star Alliance member SIA is expected to be telling if the UK carrier eventually decides to join an alliance. Membership of Star would give Virgin access to United’s vast US network and maybe that of US Airways, which United is trying to buy. Sir Richard has mentioned Delta and Continental, which Virgin has a codeshare deal with, as possible alliance partners. But they are understood to be talking about a merger and boosting ties with Delta partner Air France.
American Airlines is with BA, as will be Northwest if the KLM deal goes through.
Andrew Monk, a City analyst with ABNAmro, understands Sir Richard’s reluctance to join an alliance. He said: “If Branson does jump into Star Alliance, he might as well sell the rest of his airline.”
Sir Richard’s unequivocal comments on global airline partnerships last week coincided with the restart of transatlantic open- skies talks.
He fears that Labour and the US government will agree to free up transatlantic access at Heathrow for additional US airlines and British Midland, forcing more competition on Virgin. In return, Sir Richard is sceptical that his demand for access to the US internal market will be granted. “We want true open skies but it all seems to be going against us. Virgin is out of the loop,” said Sir Richard.
This apparent resignation to the harsh realities of aviation life may yet force Virgin into dealing with other carriers.
An unlikely meeting between the Virgin boss and BA chief executive, Rod Eddington, scheduled for this week, also signals a thawing of Sir Richard’s opposition to speaking to rival airlines. “If all else fails, we will have to talk to the other airlines,” he said.
Maybe, just maybe, the not-so-shy Virgin is preparing to join the alliance party.
Who’s partying with whom – and who is left out?
Oneworld friends
British Airways, American Airlines, Cathay Pacific, Qantas, Aer Lingus, LanChile, Iberia and Finnair. BA is talking to KLM and partner Northwest Airlines.
Star Alliance buddies
British Midland, Lufthansa, SAS, United Airlines, Singapore Airlines, Air Canada/Canadian Airlines, Varig, Austrian Airlines Group, All Nippon Airways, Mexicana, Air New Zealand, Ansett Australia and Thai Airways.
Virgin Atlantic – no global pals
But is trying to form UK-Asia-Australia alliance with stakeholder Singapore Airlines and has transatlantic codeshare deal with Continental Airlines.