October 7, 2014
Is there more behind Virgin’s decision to scrap Little Red than the obvious?
Eighteen months ago Virgin Atlantic, jointly owned by Sir Richard Branson and Delta Air Lines, introduced Little Red to the UK domestic flight service. Operating between London Heathrow and Manchester, Edinburgh and Aberdeen, the intention behind Little Red was to provide a nationwide connection service to Virgin’s long-haul flights out of Heathrow. The reality, however, is that users saw Little Red as nothing more than an affordable domestic carrier in its own right and the necessary connections to long-haul flights did not materialize. Additionally the number of domestic users was lower than anticipated anyway.
Virgin Atlantic’s Chief Executive, Craig Kreeger, revealed: “It was always a huge challenge on behalf of the consumer, as the totally inadequate number of slots made available by the European commission did not deliver close to BA’s network position, even when supplemented by our own slots to fly between Heathrow and Manchester. The time lag between the takeover of bmi and our entering the market also meant Little Red initially faced an uphill battle to win recognition and convert customers to its services.” At the beginning of this week Sir Richard Branson conceded: “When the competition authorities allowed British Airways to take over British Midland and all of its slots, we feared there was little we could do to challenge BA’s huge domestic and European network built through decades of dominance.
“To remedy this, we were offered a meagre package of slots with a number of constraints on how to use them and we decided to lease a few planes on a short-term basis to give it our best shot. The odds were stacked against us and sadly we just couldn’t attract enough corporate business on these routes.”
Okay, it is easy to accept the closure of Little Red as making business sense, but it was never going to be profitable on its own account anyway. One suspects that another part of the problem is that Virgin Atlantic has run at a loss between 2009 and 2013 (accumulated at £300m) and Kreeger wants it operating in the black by the end of 2014. Though operating at a capacity of 39%, surely part of the low numbers for Little Red is based on the fact the country has been in a recession for the last five years, a situation which automatically has a negative effect on air travel. Now that the UK is coming out of a recession it seems a strange time to shelve a plan that has a better chance of succeeding today than it had eighteen months ago. Perhaps there is another reason why Virgin Atlantic needs to be operating in the black by the end of the year and Little Red has simply become a casualty as a consequence.