When the COVID-19 pandemic started to recede and borders reopened, the aviation world breathed a collective sigh of relief and returned to worrying about routes, capacity, aircraft and the weather. While the price of oil is still a concern, the pandemic-era worries have been overtaken by the fractious geopolitical landscape that sees wars in the Middle East and Ukraine, tension between China and the US, high levels of inflation and slowing consumer economies.
A puzzling outlook for 2024
Based on all that, it’s no wonder Virgin Atlantic CEO Shai Weiss is cautious about the 2024 outlook, describing it as “too hard to call” in an interview published by Skift recently. On the positive side, Weiss said that winter bookings are strong and that leisure travellers are keen to travel to many warm-weather destinations on Virgin Atlantic’s network, especially those paying the most up the pointy end of the plane.
Those warm-weather destinations include the Caribbean, the Maldives and the recently launched services to Dubai. To meet the extra demand, Virgin Atlantic is adding services to Bengaluru, its third destination in India, resuming seasonal flights to Dubai and adding Sao Paulo (Brazil) to its network next summer. On the negative side, Weiss said that corporate travel has yet to return to pre-COVID levels but is roughly 80 percent of what it was in 2019, although it is up on where it was in October this year.
Financially, the pandemic has wrought havoc, with Virgin Atlantic posting operating losses of $1.1 billion from 2020 through 2022, far over the $93 million it made in cumulative operating profits during the previous decade. Virgin Atlantic last made an operating profit in 2019, and a net profit in 2016, and the losses forced the airline to restructure and cut around $365 million in annual expenses.
Making cuts where needed
That restructuring and focus on profitability saw the airline’s network pruned in response to demand, such as the decision to cut flights to Austin, Texas, which will end in January next year due to the slower-than-expected corporate travel recovery. Virgin Atlantic launched the route last year and has now abandoned it, despite joint-venture partner Delta Air Lines investing in its own Austin focus city.
The airline has also suspended flights to Tel Aviv due to the Israel-Hamas conflict, although Weiss, who grew up in Israel, is hopeful the service will be resumed next year. He also told Skift that Virgin Atlantic had no plans to join in the latest round of European airline consolidation but that it would likely benefit from what is happening.
The airline’s US flights are part of a joint venture with Air France-KLM and Delta that allows the airlines to coordinate almost everything with the services, including setting fares, capacity and flight schedules. If Air France-KLM succeeds in its push to buy a minority stake in SAS, that coordination pact could be enlarged to include the Scandinavian airline, possibly leading to more passenger feed into Virgin Atlantic’s transatlantic flights.
A possible outcome is that travellers from SAS’s Stockholm, Oslo and Copenhagen bases could connect over London Heathrow to Las Vegas, Orlando or Tampa, destinations not currently served by SAS. The report added that around 3,000 people, or approximately a third of Virgin Atlantic’s passengers, connect over Heathrow daily, with the majority being local UK travellers.
