A taxing question for Beardie

Richard Branson seems to have got very hot under the collar about Willie Walsh’s suggestion that the Virgin Atlantic name could disappear within a few years if Delta buy a stake in the airline from Singapore Airlines. Obviously a raw nerve there…

And if anyone wants to wind him up any more, might I suggest asking for confirmation that since Virgin Trains have won a two year extension on the West Coast route, any fees for the use of the Virgin brand name will be paid to UK-domiciled companies and UK tax paid in full.

It is not just Starbucks…

 

Virgin and the art of self-promotion

The Sunday Times Business News section has a long and unillustrious record of producing “news” items on Virgin which appear to have come direct from the company’s PR advisers and are closer to wishful thinking than proper news. If we saw in one of these pieces that “Sir Richard Branson is predicting that tomorrow will be 1st January 2011″, we would check our diaries to be sure.

Last week – obviously a slow news period for business publications – they had a front-page story suggesting that Tony Fernandes of Air Asia and Air Asia X, might bid for Virgin Atlantic.

The immediate thought is that this is Virgin themselves trying to gee-up the market by quoting a figure and trying to encourage other bidders. Of course, a bit of publicity to show what a valuable airline Virgin Atlantic is presumed to be, won’t do any harm with the paying customers who read The Sunday Times either.

However, Tony Fernandes is very friendly with Richard Branson and has copied some of his techniques. Could this by Air Asia’s PR people trying to show the UK market how big and important they are?

Air Asia have officially disowned the story but then they would – and Virgin Atlantic is a pretty unlikely fit for them anyway. You never know, it might even happen. However, one thing you can be fairly sure of is that this story has more to do with airlines and their PR companies than any proper journalism.

But I don't want to be a Rockstar

Virgin Holidays likes to market itself as a friendly, youthful company. It is currently running a promotion which tries to emphasise the personal care its customers get with the tag – “everyone gets treated like a rockstar”.

Despite the fact that many so-called rockstars are more qualified to take holidays with Saga than with Club 18-30, the aim of the campaign is clearly to woe younger travellers. This sort of ageist advertising is a double-edge sword. It might attract the young but turn-off older or middle-aged customers. In fact this is precisely the sort of advertising that would turn me away from Virgin Holidays and push me into the arms of one of the quality operators that caters for grown-ups.

Anyone booking a package through a High Street agent might like to know that staff are being given a £10 shopping voucher for every booking they make during the promotion.

Why your flight will not be cancelled

“We don’t use the word cancelled, we use the word delayed in case people start wanting their money back etc”

So said someone who appears to work in check-in for Virgin at Manchester on the www.v-flyer.com forum (an unofficial site for Virgin fans).

Maybe the lady is not who she claims and we doubt that it is the written policy of Virgin, or any other airline for that matter, but most airlines are very reluctant to announce a flight has been cancelled. The EU law on airline passenger rights gives much higher claim figures for a passenger suffering a last-minute cancellation than for a simple delay.

If you find yourself departing a few hours later on a flight with a different number or taking a different route or airline, then it is highly likely that your flight has been cancelled, not delayed – whatever the airline says.

You should remember that airlines have numerous get-outs to avoid paying compensation. The standard one is that whatever caused the initial problem was beyond their control. This can include weather, strikes or technical issues. However, if you feel that an airline has simply cancelled a flight for its own reasons (maybe a light load which is easy to transfer to a later flight), you should look at www.auc.org.uk which is the CAA site explaining the EU laws. If the airline sticks by its story,  you could also consider using the services of a specialist claims-chasing company, www.euclaim.co.uk. We would not normally recommend “ambulance-chasing” law firms but this company appears to have a good reputation and does not make an initial charge for its service.

Virgin's Woes

If you read our earlier post about Virgin, none of the following will come as a surprise.

A few days ago, we suggested that Richard Branson’s vitriolic and totally inaccurate comments about British Airways indicated that Virgin itself was in much greater trouble. Branson has past form on this – and silly verbal wars are a sure sign of one of his companies facing a hard time.

The truth has emerged rather faster than we might have expected.

Virgin, like every other airline, is facing a serious slump in revenue. However, what is startling is that its forward bookings are 30% down, compared to just 17% at British Airways.

Most airlines are looking to suspend routes, ground aircraft and make staff redundant but a 14% reduction including – so it is rumoured – 20% of all pilots, is pretty severe.

In other words, Virgin, whose strategy was to cherry-pick profitable routes and Business Class traffic from BA, is suffering more than BA.

Note:

Virgin have contacted us to say that their June booking statistics were actually ahead of many of their competitors. Whilst we are happy to include this statement, it should be added that, as a private company, Virgin publishes far less data than the major airlines, so it is much harder to judge where the company stands. We are also rather surprised that the Virgin PR machine has not gone into battle with an American consulting company that produced a much more negative report than our’s.  This has been well-circulated (even appearing on the website of the unofficial Virgin “fan club”, www.v-flyer.com) without any comment appearing from Virgin themselves.

Virgin Must Have Some Big Problems

A sure sign of when a Virgin Group company is in trouble, is Richard Branson making derogatory comments about one of its competitors. This is a fairly standard technique to deflect attention from his own companies. Low swipes at the competition are his stock in trade but his recent rather hysterical remarks would suggest Virgin has more problems than normal.

He made an announcement in the US that “one of the major US airlines will go out of business” in the current economic downturn. Of course, Virgin America is a new and fairly small airline so he could not have been talking about them.

Unfortunately, Virgin America does not look too healthy at all. Its recent figures show that it has $38 million in cash. The company says that this is sufficient to see the company through its initial start-up phase and into profitability. Based on past trading, this looks enough to last less than six months – unless the company can find a new investor.

Virgin America has been dogged by strict foreign ownership rules which insist that the majority of shares of any US airline remain in US hands. There have been suggestions that some of the current supposedly US investors are simply nominees for Virgin itself. You can be sure that any new investment will be scrutinised very carefully by rival airlines and US politicians.

Branson might well pull Virgin America out of trouble – but he is no position to question the longterm viability of other US airlines.

In the UK, his extraordinary comments about British Airways, suggest that Virgin Atlantic is really suffering. Claims that he has asked the government to block any aid to BA and saying that the airline is really not worth very much are very unwise. There is not a shred of evidence that BA has asked for aid, or has any intention of doing so, and making derogatory remarks about the value of a competitor to the extent that the share price suffers a sharp drop is sailing very close to the wind. Willie Walsh is not known for his tolerance and if Branson continues on this route he could well find himself in legal trouble.

Virgin Atlantic is the first UK airline to make some of its pilots redundant and there are rumours that more staff will be shown the door shortly. No airline is making money at the moment but Virgin looks to be be in a weaker state than many. Foolish remarks – boarding on the slanderous – about other airlines will not hide Virgin’s losses from its investors.