Image representing Richard Branson as depicted...Image via CrunchBase, source unknown

A recent article on The Sietch Blog claims that Virgin Atlantic is “on the brink of collapse”. The argument is based on Sir Richard Branson’s recent statements in the press about the threat posed by the BA/AA collusion. On this, an un-named source has commented that it reflects that Virgin Atlantic is in trouble.

Whether Virgin Atlantic, and their sister companies Virgin America and Virgin Blue can ride out the storm depends on many factors, but at the moment things are not looking good for the former wunderkind of British industry. The “budget house of cards” won’t stop toppling for some time yet.

Prevention is better than cure

In fact, Branson’s comments show Virgin’s preparedness for the upcoming threat and they are dealing with it head-on. Forbes Magazine revealed in an article that Branson unveiled last Friday the slogan “No Way, BA/AA,” which will be painted on the side of Virgin’s aircraft. This campaign will alert consumers to the “anti-competitive” nature of the proposed tie-up, which Virgin hopes will then indirectly put pressure on American antitrust regulators.

Virgin is a trusted brand

Virgin Atlantic is one of the few airlines in the world with a sound business model (first class service at business class prices) and an outstanding brand image. Most importantly, Branson is an icon people can relate with. Customers trust the Virgin brand, and this brings loyalty. They will not ditch a loved brand easily and Virgin is likely to further strengthen its position an industry leader once this crisis is over.

Let’s think of a simple scenario. If given a choice, would a business traveler fly across the Atlantic on an old American Airlines plane with service quality not even close to that of Virgin? Or would he rather fly Virgin Atlantic, having their great in-flight product and service coupled with a luxurious lounge (shown below)?  The difference in the brand experience is so huge that customers would think twice before switching loyalties.

Virgin Atlantics lounge

Virgin Atlantic’s lounge in London Heathrow

Hence, it is a stretch of imagination to say that Virgin Atlantic is “on the brink of collapse”. What do you think? Can a strong brand support a business in bad times? Is Virgin Atlantic indeed in trouble? Or are we thinking too much? Let’s discuss…

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  • http://www.virginatlantic.com Paul Charles

    It must be BA putting rumours around that Virgin Atlantic is on the brink of collapse! What a load of rubbish from our rival that loses more passenger bags than any other airline in Europe. Virgin Atlantic is in strong shape. In anticipation of the global downturn, we took action two years ago. We deferred aircraft deliveries, examined our cost base, ensured our fuel hedging was in the right place, and started building up cash. We have over £600m (over $1 billion) cash in the bank. We have a very strong management team that has been through downturns in the industry before. Virgin Atlantic is 25 years old next year – it’s in a strong position to ensure it remains one of the fittest airlines around.
    Paul Charles
    Director of Communications
    Virgin Atlantic

  • http://blog.thesietch.org Keith Farnish

    Virgin Atlantic have taken it upon themselves to try and get the original article deleted, under threat of legal action. Nice exercising of free speech – if you don’t like what’s written then try and sue the author, even if what is written is not libellous in any way…

    http://www.blog.thesietch.org/2008/09/19/virgin-atlantic-threaten-to-sue-arse-off-the-sietch/

    In the “free” world debate is not permitted, so it seems.

    Keith

  • http://simpliflying.com Shashank Nigam

    @Paul:

    Thanks for re-emphasizing the measures Virgin Atlantic has taken in anticipation of bad times. It certainly reflects good planning and resilience. Having sufficient funds in the bank also provides cushion in bad times.

    But to be fair to Keith, he makes a valid point that anything can happen given the current economic environment. To use an example from another industry, once Lehman Brother collapsed, Goldman Sachs’ stock price tumbled too, without any of their own doing. We all hope that Virgin Atlantic emerges even stronger at the end of this crises.

  • http://simpliflying.com Shashank Nigam

    @Keith: I’m with you. Free speech shouldn’t be curbed.

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