Virgin Atlantic Airways Case

McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved

 Virgin Atlantic Airways:
Case Objectives
• To integrate the concepts of services marketing as
a capstone to the course.
• To examine the themes of service quality,
innovation, public relations and pricing as they
relate to success in a service.
• To demonstrate the delivery of customer value.
• To illustrate service positioning as a competitive
strategy.

McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved

 Attributes and Dimensions of Customer
Value Offered by VAA
• Value for Money
• Innovation
• Non Conformist
• Alternative to BA
• Entertainment Service Quality
• Cheapest Deal
• Young
• Richard Branson’s Airline Entertainment
• Service Fun
• Dynamic
• Trendy
• Fun
• David against Goliath Innovation
• Life Style
• Personal
• Low Price
• Convenience
• Friendly
• Informal

McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved

 Comparative Flight Revenues
for VAA and BA
Peak-time London Heathrow/JFK flight at full capacity
B747 aircraft with configurations described on p. 6 of case
VIRGIN ATLANTIC AIRWAYS
Upper Class: 50 seats at $1,195 = $ 59,750 47%
Mid Class: 38 seats at $473 = $ 17,974 14%
Economy: 271 seats at $185 = $ 50,135 39%
Total Revenues = $127,859 100%

BRITISH AIRWAYS (BA)

First Class: 18 seats at $1,935 = $ 34,830 15%
Club World: 70 seats at $1,061 = $ 74,270 32%
World Traveler: 282 seats at $445 = $125,490 53%
Total Revenues = $234,590 100%

McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved

 VAA’s Weaknesses
• MARKETING • SERVICE AND
STRATEGY ORGANIZATIONAL
– No clear customer targets CAPABILITIES
– “Wild” image not good for – Punctuality
all customers
– Public relations efficient – Age of fleet
but less controllable than – Losing momentum on
advertising innovation?
– Low trial rate – For how long can staff be
– Power of competing kept motivated?
frequent flyer programs
– Small feeder networks

McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved

 VAA’s Weaknesses
• ECONOMIC • DEPENDENCE ON
VULNERABILITY BRANSON
– High break-even point – Value of VAA without
– Lack of economies of Branson?
scope – Real value of Virgin
– Capital brand?

McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved

 VAA Possible Actions
• PRESERVE AND
IMPROVE CURRENT
STRENGTHS
– Innovation
– Service quality
– Fun
– Staff motivation
– Punctuality
– Fleet renewal
– Expand Virgin Freeway

McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved

 VAA Possible Actions
• BUILD A NEW STAGE IN
THE DEVELOPMENT OF
VAA
– Transform core values into
unambiguous positioning
strategy
– Design differentiated marketing
strategy for specific target
groups
– Break the trial rate wall
– Build selected feeder lines in
Europe
– Investigate sensitivity to price
increase, while keeping a price
advantage

McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved

 VAA - What Happened?
• VAA announced joint Heathrow-Sydney service via
Hong Kong with Ansett Airlines
• Announced another partnership with Malaysia Airlines
for flights from London to Kuala Lumpur
• Alliance with Delta approved
• VAA renamed its full-fare Mid Class cabin Premium
Economy because of confusion
• VAA won yet another Executive Travel Airline of the
Year award in January 1995
• Branson ranked in eleventh place in 1994 among
Britain’s rich with 895 million net worth
McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved
McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved