Virgin's Slot Game


Today's surprise announcement by Virgin Atlantic came as, well, a surprise. The long-haul carrier now wants to launch a short-haul, domestic route from London Heathrow to Manchester, putting itself in direct competition with arch rival British Airways. But why? I asked Patrick Edmond of Dublin-based e2consultant, a network strategy consultancy, his take on today's announcement. Here's what he had to say: 

The news that Virgin Atlantic (VS) is proposing to launch a 3-times-daily London Heathrow - Manchester service from next March has come as something of a surprise to many. Why is VS bucking the trend that has seen short-haul routes at LHR being progressively cut to make way for long-haul? Has Richard Branson thrown his toys out of his pram at the surprise loss last week of Virgin's flagship UK West Coast rail franchise, linking London with Manchester and Glasgow? Does VS see a Manchester feed as the magic solution for a loss-making long-haul network (in the red to the tune of £80m last year)?

I think the answer is simpler. Consider this: VS is in the running for the LHR slots which IAG has to surrender as part of its bmi takeover approval. They're up against Aer Lingus and perhaps another (Air France?). The majority of those slots are earmarked for Edinburgh and Aberdeen. The IAG competition trustee will award these slots from summer 2013 and the decision will be made in the next couple of months. But curiously enough, the deadline for applications to the trustee happens to be... the day after tomorrow (23 Aug).

Now if you were VS, with no short-haul experience, seeking to make a credible case to the trustee that you are committed and able to operate a UK domestic network, and up against at least one tough competitor (Aer Lingus, with a major presence at Heathrow and no shortage of experience in short-haul operations), how would you strengthen your argument? Perhaps it might help your case if you could show that, even in advance of the Edinburgh and Aberdeen slot award, you're "committed" to start building a UK domestic network, for example by announcing a Manchester route? 

And if at the same time you were "preparing to appeal" IAG's bmi takeover to the European Commission, in part because of your concerns about Manchester-London competition, it could be helpful to be seen to be showing interest in the route.

What about slots and aircraft for MAN-LHR? Well, the slots would come from VS's existing portfolio, either from VS routes or frequencies that were for the chop next summer anyway or from slots that have been leased out to other carriers. And the aircraft? That’s the big question. They’d wet-lease the A319 aircraft, and I can’t help wondering if they might turn to their sister company Virgin America.

But I write "committed" in quotes, because to tell the truth, I’m not 100% convinced about this Manchester route actually taking off. I think this story is more about perception than reality. If Virgin doesn’t win the IAG slots for Edinburgh and Aberdeen to give itself a real (though small) UK domestic network, and if its appeal to the EC goes nowhere, will its Heathrow-Manchester service still go ahead? Maybe I’m a cynic, but I wouldn’t bet on it.

Follow Patrick on Twitter @e2consultAero

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