So where did it go wrong for Virgin Little Red?

So by now you’re all aware that Virgin Little Red is to go the way of the dodo.

But where did it go wrong for this upstart?

Lets take a step back an analyse what happened to get to this point.

In 2012, British Midland International was put on the sale block and sold by its then owner Lufthansa, and was brought by International Airlines Group – the owners of British Airways and Iberia. As part of the sales remedy, slots were allocated for use of certain routes

Virgin Atlantic placed bids on a load of slots (with the airline famously losing the Moscow remedy slot to EasyJet, and with them wanted to set up its own domestic feed airline to funnel passengers through London on its services.

The net result was Virgin Little Red, who were to operate services from London Heathrow to Manchester, Aberdeen and Edinburgh.

Operates commenced in 2013 to some fanfare with the airline promising 26 domestic flights a day.

And this is where it went wrong. The loads of passengers aboard were frankly – embarrassing, with the CAPA and the UK CAA reporting utilisation at 37.6%.

Was it a mixture of more flights operated by British Airways to more destinations? Were the times of the flights badly timed to make poor connections? Or was there another factor that we have yet to look at – the Low Cost Carrier?

Virgin Atlantic was hoping to build Virgin Little Red on feed to its International long haul services. Whilst this is great in principle, Virgin Atlantic’s network isn’t exactly large (and in fact the bush of a network is resembling a bonsai tree after the last changes).

None the less, the feed wasn’t coming. Whilst point to point traffic was growing – this isn’t hot traffic, as the majority of the fare is swallowed up by taxes on UK domestic routes – leaving the airline not much money after a ticket has been sold.

Then we come on to the Low Cost Carriers.  As it’s commonly known in Europe, the Low Cost Carriers are masters of point-to-point traffic. This can been seen at Aberdeen (where EasyJet fly to Luton and Gatwick), Edinburgh (EasyJet to Luton, Gatwick and Stansted, BA Cityflyer to London City) and Manchester (where they compete with Virgin Trains on point to point traffic between centres).

So what next? Lets look at the drawn-down points:

• Manchester will cease by the end of March 2015 – Operating for 4 IATA seasons
• Both Edinburgh and Aberdeen will cease at Summer 2015 – operating for 5 IATA Seasons

Why is the number of IATA seasons important? For Manchester, these slots come from Virgin Atlantic’s current portfolio. For the resolution flights (Aberdeen and Edinburgh), it’s very important as these slots come from the BMI sale resolution slots, which state these slots must be used on European and Domestic services for six IATA seasons according to the European Commission ruling ec.europa.eu/competition/mergers/cases/decisions/m6447_20120330_20212_2452290_EN.pdf

This could put a halt in any plans for Virgin to re-purpose the slots to long haul services, with a failure to operate the routes for a full six seasons allowing for a competitor… or British Airways to grab the slots for its own network.

So, was this a waste of time? Virgin Atlantic should had looked more carefully at British Midland International to understand how bad the UK domestic operation was (with services pulled left, right and centre). As a slot sitting exercise… it’s held onto slots for 2 and a half years that competitors can’t use. I suspect the full three years would had made too many looses to carry – even considering the value of a pair of Heathrow slots.

For Virgin Little Red, it’s time to bow out.

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