<B>Virgin Ups Viability</B>
By David Jonas
Virgin Atlantic is refurbishing what already had been a popular premium product in an effort to attract new clients in the highly competitive and lucrative transatlantic market.
With additional business traveler conveniences, a pair of new U.S. gateways and nontraditional contracting options for buyers, Virgin has become a viable secondary or tertiary carrier for more corporations.
The crux of Virgin's appeal to business travelers is its highly regarded Upper Class cabin. The business product is being prepared for relaunch after a $60 million makeover. Half the fleet will be refit with the new cabin by year-end and the remainder by next summer. The project is the final phase in a complete renewal of the entire flying experience.
Aside from the new fully reclining seat, cabin changes include lighting modifications, on-demand dining, a new location for the inflight therapist and an expansion of the inflight bar from three to seven seats.
"Upper Class really is our calling card when we go visit with corporations," said Chris Rossi, assistant vice president of sales. "We have to sell that against our network weaknesses and other things where we come up lacking against the other major carriers."
Virgin said it now has more than 200 "significant" deals in place with corporations and agencies, a number that has been trending up over the past few years. "We use corporate and agency agreements as a conduit to partner, the same way other airlines may use frequent flyer mileage as a tool," Rossi said, adding that companies with all volume levels can be accommodated in one way or another.
"For example, a 100-sector business between New York and London is of more meaning to us than it would be to one of the large domestic mega-carriers," said John Riordan, vice president of sales and marketing for North America. "So, we can fight our way into the market while staying below their radar. We want to get really big by staying small."
New York-based Pfizer is one company that uses Virgin Atlantic to fill in some of the gaps not covered by its larger, preferred suppliers. "They provide us some support out of Boston and back-up support out of New York," said corporate travel manager Phil Dunphy. "And it's a significantly different product at what really is a great price."
Recognizing its niche in the corporate market, Virgin is very willing to offer flexibility in contracting, including a bulk buy configuration in some cases.
"Corporations do ask us to come up with ideas outside the box," according to Rossi. "The reality of our corporate deals is that we don't have these fill-in-the-blanks contracts. Our account managers are empowered to come up with innovative solutions."
Even so, Virgin acknowledged that selling the program internally is a lot more difficult for them than other carriers that have the advantage of vast frequent flyer mileage programs and familiarity from their domestic services. "But companies want us in their travel program because of our service," Rossi said. "That is the differentiating factor."
Another differentiating factor is the direct involvement of Virgin chairman Richard Branson. Indeed, Branson is known to personally call corporate accounts to both sell the product and ask key buyers for their thoughts on certain plans and developments. "There is always the Richard factor, after all, his skill is selling," Riordan said. "And how can a competitor sell against that?"
"Virgin really has been creative in its contracting and also creative in its marketing plans. They do a good job, once the deal has been consummated, in jointly rolling out the program," said one buyer at a major New York-based account. "And yes, Sir Richard called our integrated procurement team to personally thank us for the business."
Also, Riordan pointed out that the continued 10 percent commission policy is a big draw for buyers wary of dwindling commissions from major U.S. airlines.
Meanwhile, when appropriate, Virgin offers Flyingco, a soft-dollar incentive program that rewards travel with free tickets or other value adds. While any corporation can enroll in the program, Virgin said it fits best for small and medium-size companies. The program, launched earlier in the United Kingdom, became available to U.S. corporations in January.
In terms of growth in the United States, Virgin already is ahead of its internal targets for its two newest gateways, Chicago and Las Vegas.
Chicago, which launched last November, is a business-oriented market with stiff competition from American Airlines, United Airlines and British Airways. "In classic Virgin style, we came in with one puny flight a day against the combined 1,100 daily flights available from American and United," Riordan said. "It will take us time to get to the level where we will be one of the key players in the Chicago business market. In another 12 to 15 months, we will be happy with our stature there."
Nevertheless, Rossi said the carrier "absolutely" has been able to steal some corporate accounts from the well-entrenched incumbents and that "noone would be dissatisfied with our market share in Chicago after only 10 months."
Las Vegas' strong appeal to leisure travelers from the United Kingdom has meant excellent performance for Virgin; revenues are 18 percent to 20 percent above targets since service began in June. Yields and passenger numbers also are above expectations. The carrier's marketing and frequent flyer partnership with Las Vegas-based National Airlines has helped solidify Virgin's position in the market.