Virgin cuts fares, may shrink in ‘depressing’ year


Virgin Atlantic Airways Ltd., the long-haul carrier controlled by billionaire Richard Branson, is slashing prices, offering London-New York round trips for as little as 259 pounds ($377), and may trim seats to ride out a slump in demand, Chief Executive Officer Steve Ridgway said.

The airline probably will cut capacity this year and avoid dropping routes, the CEO said today in a Bloomberg Television interview. Crawley, England-based Virgin halted growth last year as it became apparent that business would ease, Ridgway said.

“It’s slightly depressing,” Ridgway said. The airline wants to celebrate 25 years of flying while a global economic recession is forcing it to retrench and reduce fares. “We’ll probably shrink a bit this year, but we’re trying not to cut routes,” he said.

Fares are already under pressure as the airline kicked off a 6 million-pound advertising campaign today that seeks to fight industry “doom and gloom” with low prices, the CEO said. Among fares advertised on Virgin’s Web site are the 259-pound New York trip, formerly offered at 319 pounds; a 339-pound fare to Los Angeles, reduced from 399 pounds; and 297 pounds to Dubai, down from 349 pounds.

Virgin is considering cooperation with London-based BMI, which is being acquired by Deutsche Lufthansa AG, to build a network of shorter flights. The carrier also is interested in acquiring a small stake in London’s Gatwick airport to help break a monopoly on most U.K. terminals, Ridgway said.

BMI Compatibility

“It’s very early days” on reaching a deal to cooperate with BMI because Lufthansa doesn’t officially take over until the end of the month, Ridgway said. Virgin Atlantic, which is 49 percent owned by Singapore Airlines Ltd., offers long overseas flights and BMI has a short-haul network in Europe that the CEO said would be “complementary.”

Airlines are considering mergers and increased cooperation as passenger demand declines. Virgin’s primary competitor on U.S. routes, British Airways Plc, is trying to combine with Spain’s Iberia and cooperate with AMR Corp.’s American Airlines. Worldwide air travel fell for a third consecutive month in November.

Virgin would still like to become a minor shareholder in Gatwick, the U.K. airport being sold by Spain’s Grupo Ferrovial SA, Ridgway said. Virgin wants to ensure the terminal doesn’t repeat “the dismal performance of prior years,” he said.

Investments by airline groups in National Air Traffic Services Ltd., the British air traffic control system, have already shown that carrier involvement can improve operations, the CEO said. “We’ve got a good model in how we worked with NATS,” he said.

Fuel Prices

Ridgway said that Virgin wasn’t hurt by a spike in oil prices last year because the carrier was well hedged, and said that while oil may fall further this year, he predicts that fuel will be more expensive in a year or two.

Virgin will continue to participate in efforts seeking alternative fuel sources, Ridgway said.

“The key thing is that in future, oil will get scarcer and scarcer,” he said. “The sooner we find and develop new fuels, the better.”

Virgin is also in talks with planemakers Boeing Co. and Airbus SAS about acquiring long-range aircraft that the carrier can use while awaiting delivery of its first Boeing 787s, airline spokesman Paul Charles said.

Virgin has 20 of Boeing’s Dreamliners on order, originally scheduled to join its fleet in 2011. Boeing had pushed the delivery dates back to 2013 though Charles said Virgin hasn’t gotten further information since the Chicago-based manufacturer announced more delays on Dec. 12. The plane’s delivery has been delayed four times since October 2007.

The airline made its inaugural flight on June 22, 1984, from Gatwick to Newark, New Jersey. Virgin now has a fleet of 38 aircraft and serves 30 destinations worldwide, flying about 6 million passengers a year.