Virgin Atlantic chief executive Craig Kreeger was guest speaker at the latest Travel Weekly Business Breakfast. By Chloe Berman
Heathrow: ‘Third runway is the right choice for UK, but will Virgin benefit?’
Virgin Atlantic’s Craig Kreeger said he is confident a third runway at Heathrow would be the right choice for the UK – but admitted it is unlikely to happen during his career.
Kreeger, who became chief executive of the UK carrier in February 2013, said he had met Sir Howard Davies, chairman of the Airports Commission, on many occasions and thought he would take a “very considered view”.
However, the former American Airlines executive said he didn’t know if a third runway at Heathrow would benefit Virgin.
“If you tell me how the slots are going to be allocated, I can figure it out,” he said. “If it ends up being biased towards new entrants and we don’t get our fair share of the slots, that would be dreadful for Virgin.
“But I’m 100% confident it’s right for the country. We’ve been sitting in a stalemate for many, many years and it’s ridiculous for the UK.”
When asked if he expected to see additional airport capacity at Heathrow in his career, Kreeger said: “I’m 100% sure I will not still be working when they have it [but] I’m hopeful that I will be alive.”
Kreeger said the failure to expand Heathrow to the same extent as Amsterdam Schiphol meant the UK airport was missing out on traffic.
He also admitted he is frustrated by UK businesses failing to expand into emerging markets, which would create demand for new routes.
He said: “We’d love to see UK businesses become more aggressive at expanding outside more traditional markets.
“When you see the amount of commerce between France and Latin America, it’s frustrating for us as an airline to not see the same level of commercial development between the UK and those countries.
“Because if it were there, we’d love to add some services to Latin America.”
Virgin: ‘Cutbacks won’t hit customers’
Virgin Atlantic is in the middle of a “great mode of recovery” but will never lose its “cool, innovative factor”, according to Craig Kreeger.
The airline’s chief executive said cutting costs without having an impact on the customer was a priority for him when he joined the business last year.
He told the Travel Weekly Business Breakfast: “I took the job 15 months ago with a clear mission statement: to work with our team and improve the financials of the company while retaining the magic of the culture and the brand.
“The good news is, I’m very confident that we’re going to do that. I wouldn’t be issuing profit warnings if I was [running] a publicly traded company today.”
Kreeger said cost savings had to be made in a way that would not impact the product or customer services. He said: “I asked a lot of questions about how we do things and if we could do them less expensively. We’re investing in a new fuel management system that allows us to fly our aircraft more efficiently.
“Some of it is about little things that just add up, like becoming more paperless, and moving to a cloud-based storage system. There are lots of little things away from the customers.”
When asked if Virgin plans to bring in more ancillary charges, having announced the introduction of fees for selecting a seat, he said: “That’s the only one we’re talking about. The idea of trying to create fares that have different features is a long-term change that’s happening in the industry and we can play in that space.”
In terms of the market, Kreeger said the summer had been softer than expected. “We saw a pretty big pick-up last year on the year before, and a little pick-up this year versus last year. When you look at the summer, it looks strong but maybe not as strong as you might have guessed.”
Little Red: Bookings ‘Have turned a corner’
Kreeger said he is confident that Virgin Atlantic’s domestic service Little Red will continue to grow, having seen a “major shift” in bookings at the start
of this year.
The domestic carrier had load factors of just 37.6% in 2013. However, Kreeger said the airline had turned a corner at the start of the year.
“We had a major shift up in booking volumes starting in January and we’ve seen a 40% increase in 2014 compared with last year in connecting customers. Booking levels are now right on plan,” he said.
Kreeger dismissed comments by IAG chief executive Willie Walsh that Little Red must be “costing a fortune”.
He said: “It’s not costing us a fortune. It’s on a trajectory that this year it will do what it’s supposed to do. Maybe it’s costing Willie a fortune.”
A380: Order is deferred again
Virgin Atlantic is still undecided about whether it will fly the Airbus A380.
The airline has an option for six A380s and has repeatedly delayed its order.
Kreeger said: “When we look at the economics of our business, it hasn’t made sense for us so we have deferred the order. We’re facing another decision this month. It doesn’t look like it makes sense in the current economic environment.”
The airline is focusing on its 17 new Boeing 787-9 Dreamliners, the first of which is due to enter service in October.
He said: “The 787s’ operating costs are so much lower – yes, it’s a big investment, but a positive one. The end of October is the target date and everything is on track.”
Kreeger said the aircraft would offer a “different level” of entertainment system and Wi-Fi connectivity in premium economy.
The airline plans to improve its premium economy offering in the coming months. Kreeger said: “We’re looking at upgrading food, in particular presentation, which is the one element that most notably doesn’t quite hit the premium mark.”
Delta tie-up: The virgin name ‘will not be scrapped’
Craig Kreeger said IAG boss Willie Walsh was “crazy” for suggesting the Virgin Atlantic name would be scrapped by its new US partner Delta Air Lines.
When news of the partnership between Delta and Virgin Atlantic emerged in 2012, Walsh said he would be happy to wager Sir Richard Branson a “knee in the groin” that Virgin Atlantic wouldn’t exist in its current form in five years’ time.
But Kreeger told the Business Breakfast: “Delta and Virgin both desperately need Virgin Atlantic to be Virgin Atlantic. We both need to compete successfully with British Airways and American Airlines, and we need a brand, a product and a service that wins.”
Kreeger insisted Delta’s acquisition of a 49% stake in Virgin Atlantic last June would not mean the Americanisation of the Virgin brand.
He said: “We have a good history of competing transatlantically…and any Americanisation or Delta-fication of our brand, which would threaten that capability, is not in Delta’s interest or ours.
“Willie’s crazy to say this is going to fundamentally change the Virgin Atlantic brand.
“It may change how effective we are at competing, but it’s not going to change how we compete.”