VIRGIN ATLANTIC AIRWAYSTEN YEARS AFTER

Anand K V Anand Nambiar Anand Sivadas Ankit Roy Surya Murali Vidhi Gupta

Case Highlights
Introduction Case Objectives The Airline Industry Virgin Atlantic Airways -Background and History Major Events and Areas of Concerns How Virgin Atlantic Airways Addressed Issues New Service Development Service Blue Printing Virgin Atlantic Airways

Service Blue Printing British Airways

Virgin Atlantic Airways vs British Airways Conclusion

Introduction
This case talks about Richard Branson, a highly enterprising and a dynamic entrepreneur who dared to dream big. The case highlights the successful journey of and the emergence of Virgin Atlantic Airlines as one of Britains second largest long haul airlines specializing in quality and innovation, led by a great leader, Richard Branson. It is quite intimidating to learn about Richard Branson, who single handedly created a strong brand named Virgin, starting from an initial business of mail order records in the 70s, this man with his sheer hard work, determination and foresightedness took Virgin to great heights of setting up a fully fledged Airlines Travel Company in 1994-95

Case Objectives
Understand the key strategies and core competencies of VAA, its

target market, segmentation and positioning and brand image

Demonstrate the delivery of customer value

Illustrate service positioning as a competitive strategy

How Virgins innovative ideas and newer concepts helped in

achieving best service in the cheapest price

To demonstrate the delivery of customer value
To illustrate service positioning as a competitive strategy

THE AIRLINE INDUSTRY

Classified into four major categories: International National Regional Cargo
Most airlines use differentiated pricing, in order to sell air services at varying prices

simultaneously to different segments. 1978 saw the deregulation of the US air transport which resulted in lesser government rules and intervention leading to increasing competition among the American airlines The airline industry faced its biggest challenge and crisis in the year 1990s global recession and the Gulf War. The airlines industry saw losses of $8 billion in 1992. Between 1990 to 2000, industry growth increased by 7% per year.

Virgin Atlantic Airways Background In 1982, Randolph Fields and Alan Hellary set out to start a

new airline, named British Atlantic Airways (BAA), renamed as VAA later by President Richard Branson Virgin Atlantic is the second largest British Long Haul international airline Its headquarters are located in Crawley, England, United Kingdom. Virgin Atlantic operates a fleet of 38 aircrafts: 13 Boeing 747s and 25 Airbus A340, with 6 orders of Airbus A380 and 23 orders of Boeing 787 to be delivered in 2013 and 2011 respectively.

Areas of Concerns
Lack of scale: The Company operated in 27 destinations whereas, its

top competitors British Airways and Thai Airways International operated in 148 and 600 destinations worldwide. Virgin did not serve enough destinations. Due to the rising oil prices globally, the prices of aviation fuel had increased substantially. This could impact Virgin Atlantics margins as it is mostly reliant on air freight business. An economic slowdown in the UK, US and Euro zone affected Virgin Atlantic because its targeted customers resided in these countries. Tough competition from 9 major competitors; AMR Corporation, British Airways, Cathay Pacific Airways, Continental Airlines, UAL Corporation, BMI, Lufthansa, Delta Airlines and Japan Airlines. Consistency in maintaining a high service quality. Addressing people perception of Virgin Atlantic as a Cheap and Cheerful airline. Issues related to the age of its fleet and punctuality problems. Maintaining and sustaining high innovation levels. Retaining and attracting customers.

How Virgin Atlantic Airways Addressed Issues

Added newer destination; In 1994 it also added flights to Hongkong and San Francisco. In September

2006, Virgin Atlantic announced that it has teamed up with one of the worlds ten largest airlines, All Nippon Airways (ANA), which allows Virgin Atlantic passengers to fly to Japan on ANAs domestic services. It also proposed to add new routes; Washington DC, Chicago, Auckland, Singapore, Sydney and Johannesburg. Newer fleet: On its 10th anniversary, Virgin had 8 B747 200s, a B747-400 and A340s. It was in the process of adding another B747-400 and a fourth A 340. It decided to expand its fleet to 18 planes. On Time Initiative introduced where cabin crew were to shut doors exactly 10 mins before departure time to avoid delays. All complaints from the Upper class were handled within 24 hrs, Economy class within a weeks time. For any delay in flight a personalized fax of apology was sent from Richard Branson himself. Introduction of new Innovative services like; Served special meals to infants and children. Provided childrens channel, safety seats, changing facilities and baby food. Installation of in flight entertainment system. Initiated a beauty therapist service/ tailor service. First airline to offer automatic defibrillators and a trained staff to assist cardiac arrest victims. Introduction of the frequent flyer program Beat the perception of being a Cheap and Cheerful airline; Virgin focused on the corporate segment and worked towards establishing itself as a sophisticated, business class long haul airline. Special Service to its Upper Class Travelers; Free Limousine service Inauguration of the Gatwick Upper class lounge in 1990 and the Upper class lounge at the Heathrow in 1993. Electronically operated 54 inch seat and 55 degree recline, on-board bar for the upper class.

New Service Development

The steps of the process are: Business strategy development or review: Virgins main focus was on a leisure travel. But considering the increase in oil prices and deregulation in airline industry, virgin had to do something different. In order to stand at such turbulent situation, Virgin can come up with something which reduces their cost and also affordable to there customers. New service strategy development: virgin had already covered customers who wanted comfort, leisure and sophistication. They must now focus on customers who just want to travel at the cheapest cost possible. Competition also demanded to come up with a service which can lead to reduction in their costs. Idea generation: start with a no frill airline. In this type of service all the facilities of Virgin Atlantic would be available but only after paying for it. Business analysis: cost and competition were the two main factors which were leading to losses for the company. In order to counter that such a service would be very much viable at three most frequent routs i.e. Newark, Tokyo and Boston. All three places are typical industrial and business hubs. Therefore, service class and small mid size business owners would be clientele that Virgin can look for. Such people would be most interested in cheap travel. Virgin would be benefitted by getting a regular business at low cost. They can make profits on the other paid services. Virgin was planning to buy some new aircrafts and discard the existing ones, such discarded planes can be used to for there NO FRILL AIRLINE OR VIRGIN BLUE Service development and testing: testing can be done by offering cheap tickets for few days on such routs. Market testing: online surveys/questionnaires/on board surveys can be done in order to find out the customer needs and wants. Commercialization: at this stage, the service goes live and is introduced to the market place. Virgin can approach big companies for business. Post introduction evaluation: at this point in time, information gathered during commercialization of the service can be reviewed and changes can be made to the delivery process, marketing mix variables on the basis of actual market response to the offerings. Customers expectations: For an airline service the basic customer expectation would encompass

On time flights Cheap air travel

Service Blue Printing Virgin Atlantic Airways Service blueprinting is a special type of process flowcharting. It

involves layers of steps, with each layer representing a different proximity to the customer or different functional areas. A service blueprint shows the interaction of various elements of a service process. A simple service blueprint may involve two layers, a front office and a back office. The front office, called by some the front stage, is those parts of the service process that are visible to the customer. Activities in the front office may include greeting with the customer, taking the customers order, operating on the customers ingrown toenail, etc. The back office, or back stage, involves those parts of the process that are not visible to the customer. In a service blueprint, the front office is separated from the back office by a line of visibility.

Service Blue Printing Virgin Atlantic Airways

Service Blue Printing Virgin Atlantic Airways

STEPS ABOVE THE LINE OF VISIBILITY AND THEIR IMPORTANCE FOR A CUSTOMER Reservation and Payment The customer needs tickets as per their preference of date and time of travel, thus the airline should ensure availability of tickets at different time slots in order to be able to serve the customer. Security Check-In and Baggage Handling At the time of boarding the flight, it becomes necessary that the customer should be assisted at each step till the time he/she has boarded the flight. Security check and baggage check-in procedure are the most time consuming and cannot be escaped or shortened, thus the airline staff and crew should ensure complete assistance and support to each customer boarding the flight. Boarding Flight The air hostesses play a critical role here by allocating right seats to each customer and ensure that they have comfortable settled in the air craft. Services Offered While Flying Services like meals, snacks, drinks and sleeping arrangements for longer duration flights becomes an important aspect for a customer. Landing and Baggage Claim While landing and claiming the baggage, it is important to inform the customer about the right counter and correct path to follow in order to speed up the process. In case of any loss of baggage or delay in delivery, immediate assistance should be provided. Checking-Out Lastly, while checking out it is important to assist the customer with baggage handling, booking a cab for the desired location from the airport and provide correct information about the location he/she is planning to reach. Standardization can only be done in selected steps which can make the entire experience more easy and less time consuming for a customer. It would help in saving time and the customer can board the flight without facing any complexities. Some steps where standardization can be applied are:Reservation and Payment System Security Check-In and Baggage Handling Landing and Baggage Claim Checking-Out POTENTIAL FALL POINTS Fall points are areas where the company (Virgin Atlantic Airways) needs to work on in order to improvise their level of service and provide satisfaction to the customer upon usage of a service. Fall points can occur at any point during the entire air travel experience and the company needs to ensure that such fall points should not create trouble for a customer else it may lead to loss of time, resources and future sales. Some of the potential fall points could be:Delay in delivery of tickets or wrong printing on the tickets Promising the desired seats and not providing them at the time of travel Long queues at the baggage check-in points Long waiting after check-in procedure is complete Extra time consumed while taking off and landing due to air traffic or other technical errors Long waiting at the time of baggage claim and check-out

POTENTIAL MEASURES OF PERFORMANCE (SOFT & HARD STANDARDS) SOFT STANDARDS (QUALITATIVE)
Management: A transparent feedback system Richard Branson

was always accessible to all its employees at any time of the day Employees: Informal but caring, young vibrant interested courteous and willing to go out of his way to help customers. Dynamic Business Culture: Encouraged staff initiation and provided means to implement them. HARD STANDARDS (QUANTITATIVE) Complaints: All the complaints were handled within a stipulated time and appropriate action were incorporated.
Upper Class: within 24hrs. Economy Class: within a Week.

Information: Timely information was passed on to the customers on

flight delays and cancellations. Upper class Lounge: A world class lounge facilities was provided to its passengers for relaxing & giving them a unique experience to fly with Virgin Atlantic.

Service Blue Printing British Airways

Virgin Atlantic Airways vs British Airways

Landing Preference: BAA enjoyed preferential landing slots at Heathrow Airport whereas Virgin lacked this benefit. The Upper Club section on BA 747: Virgin has full Upper class and half premium economy upstairs on their jumbos while BA has just Club. Reachability: BA had a high coverage of 150 destinations in 69 countries unlike Virgin which only catered to selected destinations. Market Opportunities: Since the air services in EU were fully de regulated and liberalized, and thanks to 280 airports within Europe there exist a business opportunity for both BAA and VAA. Airline Fleets: BAA enjoyed a fleet of 234 airplanes and had plans to adding another 63 airplanes. Whereas Virgin had only 38 aircrafts. Brand Image and Name: BAA carries a stronger brand name and image. It is the largest airline and flag carrier of UK and for sure the size and scale of BAA puts it in a competitive advantage over Virgin Atlantic Airline which is the second largest long haul airline in UK. Partners & Alliances, Franchising and Low Cost Carriers Marketing Strategy Technological Innovations It can be interpreted that the rivalry between BA & Virgin is relatively insignificant although strategic actions of Virgin may directly and significantly threat the BAA market & could spark retaliation in the determent of relatively small firm. Therefore Virgin Atlantic should focus in its target market and avoid competing larger firms like BAA. BAs strong key messages are consistency, reliability and quality, and the organization enjoys a good reputation and is renowned for the very high standards of customer service and efficiency. Virgin Atlantic differentiation is based on 3 strong characteristics: value, service and price, and it was recently was voted No 1 for having the best online reputation (CreativeMatch, Undated). Virgin was also voted as the most child-friendly airline, with BA ranking in the 2nd place (JustTheFlight, Undated).

Conclusion
As studied above we can conclude that Virgin Atlantic airways is situated in standard cycle markets where in its competitive advantage is moderately shielded from imitation. In general, airline industry belongs to slow cycle markets, however, due to relatively smaller capital and operations of some firms like Virgin, companies within this industry are unable to assure their long term above average returns because they are relatively vulnerable to general environment (Low lobbing power) & relatively unsecured to industry forces ( potential entrants or larger competitors predations). As a result, Virgin should focus in a specific market niche or specific routes to obtain value other than price and survive the competition.

Thank You