Sir Richard Branson, the founder and Chairman of the Virgin Group, has never made a secret of his desire to spread the Virgin brand.
Four airlines are linked to the Virgin brand: Virgin Atlantic, Virgin Blue, Virgin Nigeria and Virgin America. Australia's Virgin Blue is actually a collection of three additional airlines: Pacific Blue, Polynesian Blue and the new V Australia.
Because of foreign ownership rules, these airlines are independent entities united by brand only. There is no common frequent flyer program across all the airlines, no ability to book tickets across airlines and no codeshares.
Separate from one another, the airlines of the Virgin brand have significantly penetrated regional markets in Africa and Oceania. Following closely behind, Virgin America, though off to a rocky start, is expanding domestic service in the US. Virgin Atlantic, now almost a quarter century old, has a global network serving 34 cities on six continents.
Foreign ownership laws, which vary from country to country, have limited the Virgin Group from holding a majority stake outside Virgin Atlantic. Virgin Nigeria, Virgin America and Virgin Blue all have local majority share holders. Virgin America in particular faced a three year battle to satisfy the US Department of Transportation that it would not be a British airline operating domestically in the United States. With a maximum 25% holding allowed by law, and management agreements imposed by the DOT, the Virgin Group's minority stake allowed Virgin America to take to the skies in 2007.
V Australia, the newest member of the Virgin brand will be borne from the newly signed US-Australia open skies agreement. The airline will officially launch in December when it inaugurates service between Sydney and Los Angeles with newly purchased Boeing 777-300ERs.
New Open Skies agreements are slowly removing the barriers for operation to international carriers. Airlines are now able to fly from any destination in the United States to any destination in Europe. For example, Air France inaugurated service between London-Heathrow and Los Angeles on March 31. British Airways is using the new flexibility to base its new start up, appropriately named Open Skies, in Paris for service to North America.
Virgin says, “Phase One (open transatlantic competition) will automatically end if there is no progress on Phase Two, which is due to be in place by 2010.”
This new arrangement is only Phase 1.0 of Open Skies. Phase 2.0, that Virgin so badly wants, will likely address questions of foreign ownership (EU airlines own US carriers - and vice versa), cabotage (foreign airlines flying domestically) and environmental responsibility.
What happens if Open Skies 2.0 become a reality and collaboration and foreign ownership rules are altered? In the event that this happens, The Virgin Group appears well positioned to potentially take the reins of a global aviation empire.
When taken separately, the route structures of the Virgin airlines each fill unique market niches. A route analysis of the airlines of the Virgin brand, conducted by this blogger, using airline schedules and Air Transport Intelligence, illustrates the global reach that Open Skies 2.0 might enable. The result of combining routes of the Virgin airlines would create a stunning global network that exceeds the reach of Pan American Airways at its peak.
Virgin Blue, Virgin Nigeria (regional) and Virgin America would, in essence, become feeder airlines for the international networks of Virgin Atlantic, V Australia and Virgin Nigeria (International). If combined today, the Virgin airlines would have a fleet of 115 aircraft with 100 more on order, and options for another 130. The network would cover more ground than the distance between the Earth and the Moon.
"If negotiators break down these geriatric and indeed sclerotic barriers to the free flow of capital and allow global mergers and combinations, a group such as Virgin would no longer have to depend largely on a single node at a single crowded airport on a single small and crowded island (Heathrow) but would have nodes – hubs and connecting points – in all regions of the world's largest airline market, the United States. But this will take enormous political will, especially in the States."Virgin is far from alone in this strategic positioning. Airline alliances such as one world, Star Alliance and Sky Team are all well positioned for enhanced global networking in a Open Skies 2.0 environment. What sets Virgin apart, aside from the non-membership in one of these alliances, is the common branding and the ownership stake across the airlines.
The advantage that Virgin has in this situation is found in the root of its mission: "Our companies are part of a family rather than a hierarchy. They are empowered to run their own affairs, yet other companies help one another, and solutions to problems come from all kinds of sources."
Building the network of the Virgin airlines separately is perhaps its biggest advantage. Independently profitable airlines that allow passengers to book throughout the Virgin network, while sharing revenue all while being under a common brand creates a global identity that rivals that of one world, Star Alliance and Sky Team.