Virgin Atlantic built its reputation by embodying its founder's entrepreneurial spirit of challenging the norm and reinventing markets. Now the carrier finds itself facing its own reinvention as market developments threaten to engulf it.
It began when rival British Airways finally achieved its more than decade-long quest for a joint venture approval with Oneworld partner American Airlines. The move put pressure on the stand-alone carrier, which continued to oppose the tie-up until the bitter end, to consider its own alliance options to compete against its own reinforced rival.
Virgin hired advisors in late 2010 to review strategic options, including a possible sale or alliance. That review concluded last year as the battle for BMI began.
Virgin was dealt a second blow when BA beat the carrier to land BMI - and most importantly, its slot assets at Heathrow. Virgin continues to contest the deal on competition grounds, but now finds itself competing against a strengthened BA, while its own arsenal has been hit by the loss of BMI feed from their previously codeshare-operated flights.
The response was typical Virgin. While most European network carriers are finding ways to exit the domestic and short-haul market, Virgin is ready to jump in. The carrier will launch Manchester-Heathrow flights using wet-leased Airbus A319s next spring, with services to Aberdeen and Edinburgh to follow.
Craig Jenks, head of Airline/Aviation Projects, highlights that the move into short-haul flights has its pros and cons. "The negative is the cost of a small operation - you have diseconomies on small operations. The positive is you are continuing one or more of the biggest short-haul feeder routes BMI was supplying for Virgin by bringing them back. Presumably, the pros of this outweigh costs of the diseconomies of running a small operation," Jenks says.
Virgin will undertake this next challenge, however, without long-time leader Steve Ridgway at its helm. Ridgway, one of the longest-serving European airline chief executives, took up the role in 2001. He will leave the airline by the end of February.
Even without issues like Europe's mired economy, higher fuel and tax burdens, Ridgway's successor will certainly have plenty on his radar.
"The bigger picture for Virgin remains challenging," says Jenks. "We don't really know what he [Branson] has up his sleeve. He's capable of pulling a rabbit out of a hat, but right now we can't see the rabbit."
The airline, which posted a pre-tax operating loss of more than £80 million ($128 million) in its last financial year, has just taken delivery of new Airbus A330s and will complete the revamp of its Upper Class business cabin product in October.
In contrast, BA can enjoy the fruits - or rather slots - from its BMI acquisition. Chief executive Keith Williams says that between 10-15 of the 40 slot pairs acquired from BMI will be transferred to BA's long-haul services with the remainder used to strengthen its short-haul network.
But Jenks says that the nature of the slots gained from BMI, including a batch of 07:00 departures, does not mean there will be an immediate increase in BA's long-haul flight activity. "If you operate long-haul, you schedule it completely different," he says, noting that only Seoul has been added to the list of long-haul network destinations so far.
He says there is some flexibility, including the use of the midday slots that BMI also held. "These can be useful for long-haul," he says, noting that Seoul flights use a 12pm slot.
"I'm not saying they can't add any. They can do some and improve timings on others, but only a certain amount. The long-haul is strengthened by better short-haul connections and feed, and not just by a greater number of flights."
While BA has begun integrating BMI into its operations, the carrier pulled the plug on budget unit Bmibaby after it was unable to find a new investor. This means that BMI Regional, which was bought by investment house Sector Aviation Holdings, will be the last vestige of the British Midland name.