Virgin Atlantic eyes more established routes for growth
Posted Thursday, August 2 2012 at 21:29
As a new entrant in the market, we suffered as the initial conditions that meant it was right for us to enter the market, had changed.
We have seen the tourist numbers go back and surpass 2007. Hasn’t the airline benefited from this?
The fact that UK tourist numbers in 2011 have only just regrown to 2007 levels is an indication of how difficult the market has been.
Though tourist numbers have grown, the Kenya Tourist Board is focusing on new markets like China, East Asia and the (African) region. This is good for the country but not really for us; our main market is the UK, Europe and US; we don’t benefit as much from this strategy.
In the announcement, high taxes were cited as part of the reason the airline was pulling out of the market. How hard has the airline been hit?
Tax increase leads to an average yield decrease and a loss of passengers.
An increase of taxes on any route leads to loss of passengers.
Kenya has recently increased its Air Navigation fees and passenger tax is about to go up, but the largest increase has been in the UK, where as an industry we are lobbying the government hard. This green-tax, Air Passenger Duty, will affect the industry as a whole.
The airline also cited increased costs of operation in its statement. How have these costs impacted Virgin’s operations?
We have been hit hard in the last two years with costs increasing close to 50 per cent in that time.
The whole industry is suffering from the high cost of fuel and we are feeling it. Over a third of flying on this route is fuel; this makes it hard to make returns, at the right price to make more. Quite a challenge in a very price sensitive market, especially given the economic and inflationary pressures both here and in Europe.
So the passenger numbers have remained low or is it an issue of more capacity compared to demand, with three players on the route?
It’s been hard to match capacity and passenger demand. To keep the numbers up we have to drop prices, do more specials, look at how to entice travel agents to sell more; at the end of the day the plane might be full but the average yield is little.
Price sensitive passengers’ mean we are not getting that many people to the front of the plane — business and first class — where airlines make most money.
What is the profile of your passengers on this route?