Virgin Atlantic eyes more established routes for growth
Posted Thursday, August 2 2012 at 21:29
In May, Virgin Atlantic announced it would withdraw services to Nairobi due to increased fuel costs, rising taxes and low passenger numbers.
Its entry into the Kenyan market in 2007 was expected to give Kenya Airways and British Airways competition on the London-Nairobi route.
However, both internal and external factors have seen the airline decide to cut its losses and opt out.
Virgin Atlantic’s first blow was post-election violence that took place months after it set up, which led to a drastic drop in passenger numbers.
Sir Richard Branson, the airline’s billionaire owner, flew into Kenya to reassure the world the country was back in business; despite his efforts, passenger numbers remained low.
In the past two years the market has recovered but passenger numbers have not matched up to the capacity, leading to low revenues that could not cover the costs of operating on the route, especially with the increased cost of jet fuel and the Air Passenger Duty, which has more than doubled during this period.
Nairobi-London is a seasonal route that caters mainly for leisure tourists and business travellers. Cargo is also a major revenue contributor for the three players.
Business Daily interviewed the airline’s country manager David Ross this week about their operations in this market, major challenges, if they would return to the route and lessons learnt.
With the last flight expected to be on September 24, Mr Ross, who came in two years ago, is charged with closing down the airline’s operations in this market.
Since Virgin Atlantic made the announcement it would withdraw from the market, what has been the reaction?
It’s been a mixture of shock, disappointment and sadness. But loyal passengers have continued to book with us during this period.
Did you ever make a profit or at least break even on this route?
Unfortunately this route has never made a yearly profit. Of course peak season months, during the Summer and over Christmas, are very profitable.
But weaker months during the rest of the year offset that. In this business, we generally forecast two to three years for a new route to become profitable. Kenya was an exception because of the post-election violence, which was a blow to our operations.