Thursday, December 27, 2012

Virgin Atlantic announces more domestic flights after winning bmi remedy slots

21 March marks the beginning of Virgin Atlantic's (VS) first domestic flights with three times daily rotation from Heathrow to Manchester. This route was the first one announced when the airline was bidding for remedy slots at Heathrow that British Airways had to offer after acquiring smaller UK carrier bmi. Considering some past promises from VS which never materialized and its overall public relations endeavors, but also its business model and strategy so far, not many were of opinion that the airline would indeed launch the route, let alone domestic operations.

G-VFIZ VIRGIN ATLANTIC A340-600However, after winning all 12 daily slot pairs at Heathrow, VS announced the launch of more UK flights. The carrier's win came as a real surprise when one takes into account that Irish Aer Lingus, the third largest slot holder at the airport (after International Airlines Group and VS), was also biding and already has experience in both short- and long-haul operations. But it seems regulators applied different logic and decided to strengthen the UK carrier. Either way, neither airlines could do something revolutionary with only 12 daily slot pairs, so it does not make a significant difference at the end of the day.

So except Manchester, VS now plans to serve Edinburgh six times daily and Aberdeen with three daily rotations from Heathrow. Regulators intended all the remedy slots to be utilized on these two destinations, though part of the slots was available for some international destinations as well. The two routes will be launched after Manchester service - in April. VS said it would use some of its own slots for that route. In total, the carrier would operate 24 rotations daily on domestic routes, which it could keep for feeding purposes even if they prove unprofitable.

Reports originally said that VS would use a Lithuanian charter and lease operator Avion Express to secure a small fleet of Airbus A319 narrowbodies, but the airline recently revealed that Aer Lingus will provide four A320s instead. As expected, VS made public that it will go for wet lease agreements, meaning that the lessor will take care of aircraft and crews. Interestingly, the A320s will be painted in VS' livery.

EI-DVEThe domestic services will operate out of Heathrow's Terminal 1, before being transferred to Terminal 2 which is scheduled to open in 2014. There it will join Aer Lingus' operations. The facility will be home to Star Alliance carriers, which could point VS further into Star Alliance direction.

In Ireland, Ryanair is continuing its pursuit for a controlling stake in Aer Lingus as it hopes to take over Irish government's 25% stake. Not much has changed since Ryanair initiated this process for the third time last summer. Ryanair has not introduced any new arguments, but insists that its remedy package - which includes deals with other airlines for route launches and slot divestment - would ensure that healthy amounts of competition still exist in the affected markets after the deal. Aer Lingus is naturally against the acquisition, as is the country’s government which hopes to sell its stake to some other investor, claiming it sees no benefits from sale to Ryanair but does notice risks instead. The government is not impressed with the remedy package, and knowing Ryanair's way of doing business, these concerns are indeed legitimate. European Commission is the one deciding on the matter and is expected to reveal its decision in early 2013. Ryanair accumulated almost 30% ownership in Aer Lingus since 2006 when the first sale attempt was launched.