There’s been some chat this weekend about a sale of Virgin Atlantic. Very much like the sale of Cadbury, this is a point where my general views about the free market are coloured by views by the awful bastards who might end up owning things that I like to have [*].
Virgin Atlantic are the best international airline, without a doubt. Sadly, I seldom fly on them, for tedious reasons related to former employers’ corporate travel policies and enormous quantities of OneWorld Airmiles. If I knew I was going to have to make two business class trips to the UK over the next 12 months, I’d definitely take both with Virgin (because that would earn me a privilege card and would be aces). Since I know I’m going to have to make one economy class trip to the UK, and various other trips elsewhere also in economy, then it’s not going to happen.
And that – if you replicate for everyone who doesn’t live in the UK but thinks Virgin Atlantic are a great airline – is why Virgin Atlantic are, erm, not in quite the financial situation that a self-respecting billionaire owner would hope for.
The future of airlines is alliances plus MONEY.
As far as alliances go, there’s OneWorld, which features the UK’s second-best major airline (BA), mainland Europe’s second-best major airline (Iberia), the US’s least terrible major airline (American Airlines), Japan’s biggest airline (JAL), which I’ve never flown on, the best of the cheap Asian airlines (Cathay), and Australia’s really quite delightful Qantas. Plus some jokers (notably, Finnair. Usually, it’s cheaper to go SYD-SIN-HEL-LHR than SYD-SIN-LHR…). If you’re from almost anywhere, it has the helpful property of getting you almost anywhere else in two hops.
Then there’s Star. If you’re not from the UK or Australia, Star is not a bad alliance at all. It features Lufthansa, who are mainland Europe’s best major airline; Singapore, who rival Virgin Atlantic for The Best Airline (and, to their complete regret and lack of any kind of synergy, own a 49% stake in Virgin Atlantic); United, who’re slightly worse than AA but not by a huge margin; BMI, who used to fight it out with BA on short-haul routes until Ryanair and Easyjet killed all short-haul premium airline traffic that wasn’t direct transfers; and Air New Zealand. If you’re from almost anywhere that isn’t the UK or Australia, it has the helpful property of getting you almost anywhere else in two hops.
And finally, there’s SkyTeam. In the same way that you have McDonalds, Burger King, and greasy men selling you poisonous burgers; or in the same way that you have Microsoft, Apple, or comedy devices that only geeks can comprehend, there’s SkyTeam. SkyTeam features Air France, the most terrifyingly dangerous and irresponsible airline in the developed world; KLM, who I hate for personal reasons [**]; Delta, who’re slightly worse than United or AA; and some entirely unreassuring third-world airlines.
Aside from the alliances, you also have two airlines trying to convert their geographical and geological advantages into a viable business: Emirates, which is Emirates; and Etihad, which wishes it was Emirates. Both are perfectly acceptable.
Emirates is the best way of flying from $_medium_sized_European_city to $_medium_sized_Asian_city, because it flies to absolutely all of them, having noticed that a) its geography is perfectly suited to this; b) fuel is cheap; c) fuck, we have to do something which isn’t just oil. Having been a very good airline for 30 years, Emirates has reached the point where it doesn’t *need* an alliance. Yeah, it can’t fly transpacific, but it can do everything else. And it’ll probably buy Air New Zealand whenever everyone’s stopped being so paranoid about Arabs, if only to stop Singapore buying it first.
Etihad is more of an unknown concern. It was set up by the government of Abu Dhabi in a fit of pique about the fact that Dubai, despite being poorer and less important than Abu Dhabi, had managed to build a world-class airline. So they’ve poached many of the westerners who built massively successful airlines, and have bought huge numbers of planes, and there’s a huge “this must win” thing occurring. And Abu Dhabi airport is over 100km from Dubai airport, so there’s no actual direct reason why both airlines can’t win at once. The most important thing to bear in mind for Etihad, though, is “must be more important than Emirates”.
Oh, also Etihad has an alliance with Virgin Blue, which is Australia’s second-biggest airline. That’s a bigger deal than you’d expect – given Australia’s size and isolation, it’s a far more important market for aviation than its population would justify. Virgin Blue, under various brand names (V Australia, Polynesian Blue and Pacific Blue – the Singapore/Virgin deal currently prevents them from using the Virgin name for international flights), has a sizeable and profitable domestic, intra-pacific, and growing transpacific business.
So, out of this bunch, who’s going to buy Virgin Atlantic? Well, let’s consider the options.
1) OneWorld. No chance. It doesn’t help their network or brands, and the UK regulators would immediately tell BA to shove it.
2) Star Alliance. No chance. Through BMI, Lufthansa are the second-biggest airline at Heathrow, so slots would need to be sold. Also, it’s clear through Singapore’s behaviour that it has no interest at all in Virgin – it just wants the cash.
3) SkyTeam. Very possible. Would be sad for customers, because VS’s excellent standards would inevitably be lowered to those of the other, dreadful, airlines in that alliance. On the other hand, it’d fill an obvious gap for SkyTeam. It’s a risk for Singapore to sell, though, for the same reason: the giant UK gap in SkyTeam would be filled, which wouldn’t make its Star partners happy. And it’s not like any of the SkyTeam partners are so flush as to make Singapore an offer it couldn’t refuse.
4) Etihad. Would be good for customers: the Virgin brand would help Etihad in non-Asian markets; Virgin Blue’s already affiliated with Etihad; Richard’s involvement in “how to make people love your airline” would be welcomed rather than seen as a pain in the arse. Singapore would probably sell cheaper to Etihad than the SkyTeam airlines, as it’s not a threat on core Asian routes (no SE Asia hub). On the other hand, is there really room for non-alliance airlines, even if they do have petrodollars behind them? And how does not having a hub in SE Asia work for a global airline?
I’m keeping my fingers crossed for option 4, but we’ll see how it goes. In an example of how easy it is for people to differ on these things, veteran Aussie airblogger Ben Sandilands thinks there might be a future in a Qantas/Singapore tie-up, whereas I can’t see either airline leaving their core alliance. If the Arabs are banned, Singapore will buy Air New Zealand at some point, though.
[*] Kraft failed to appoint any Cadbury people to its management team in the US, despite the fact that the whole reason for buying the company was that Kraft had been desperately floundering but was cash-rich due to its evil cigarette dowry whilst Cadbury had being growing massively. And now it seems to be removing Green & Blacks chocolate from Australia, in favour of its pre-owned Swiss brands. No greater calumny could be perpetrated…
[*] In the days when this sort of thing happened, my employer paid over GBP2000 for a business class ticket from Detroit to Glasgow for me with KLM. The Detroit-Amsterdam plane wasn’t a problem, but my scheduled plane out of AMS was cancelled. They then let two more planes leave for Glasgow without me on either of them, on the grounds that people who’d paid GBP100 for a quick hop in economy were more valuable than business class customers and they couldn’t possibly bounce anyone. Even as someone who travels for next-to-nothing at the back of the plane whenever I can, that ain’t right – you find some hippies who’d be willing to spend another night getting stoned, you give them GBP200 to turn up tomorrow instead, and you get your business class passengers on the next plane.