Virgin Atlantic is not worried about new competition from long-haul low-cost or all-premium start-ups.
The carrier's group commercial director, Willy Boulter, was asked about the impact start-ups in the new long-haul, low cost and all-premium sectors at a small press conference yesterday in London following the signing of a new alliance agreement with Japan's All Nippon Airways (ANA).
Virgin Atlantic is already competing with Oasis Hong Kong Airlines between London and Hong Kong and AirAsia is planning to also launch a long-haul low-cost carrier that aims to serve London by year-end.
"It is an interesting development," Boulter says. "But there are structural differences between the short-haul and long-haul markets.
"We already utilise our aircraft 14 hours a day. And we already utilise crews the maximum amount of hours allowed under the law," Boulter adds. "It's hard to see new long-haul carriers being able to provide seats any cheaper than we do today."
He says long-haul economy fares are already cheap, especially on the transatlantic. When low-cost carriers first launched in the short-haul market, they were able to undercut economy fares by 50%. But Boulter does not see this happening in the long-haul market and points out legacy carriers also enjoy "cross subsidies" from business class and cargo.
Virgin Atlantic is equally not worried about start-ups in the other end of the spectrum - all-premium services. Three all-premium carriers are now competing against Virgin between New York and London: Eos, Maxjet and Silverjet.
"Clearly it's a new phenomenon but we haven't seen much of an impact on our transatlantic business yet," Boulter says.
Virgin Atlantic's partner ANA has a different perspective when it comes to low-cost and all-premium. ANA executive vice-president Katsuhiko Kitabayashi says it is now trialling a new low-cost product domestically and later this year it will begin trialling an all-business class product.
The all-business class product will be offered from September on a specially configured 36-seat Boeing 737-700ER between Tokyo and Mumbai. "There is no particular strong demand for travel between Japan and India, but there is business class demand," Kitabayashi says. "For us this is a new model and a way to trial a route."
He says ANA is also looking at offering its ANA BusinessJet product between Tokyo and Moscow: "Moscow for the moment is being considered. We see Russia as a potential lucrative market."
Kitabayashi says a low-cost service is now "under trail" to give ANA ideas about how it can compete against low-cost carriers. ANA plans to launch a low-cost carrier in 2010, when the opening of a fourth runway at Tokyo Haneda airport will allow low-cost carriers to expand in the slot-constrained Tokyo market.
"It's our homework for the future. How do we compete against a low-cost carrier in the future," he says.
Japanese low-cost carriers are currently very small and have limited access to major markets. "It's not easy for carriers in Japan to be low-cost because the cost is high in Japan and there are infrastructure issues," Kitabayashi says.