Virgin Atlantic and the Caribbean by qym17251

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									Virgin Atlantic and the Caribbean
  Joe Thompson, GM Airline Planning


  CTO European Marketing Forum
        9th November 2008
Today’s presentation


   •
  1 Virgin Atlantic’s 10 years in the Caribbean

   •
  2 Short-term outlook: an airline perspective
     - impact of a downturn on Leisure demand
     - the price of jet fuel

   •
  3 Longer term plans
     - new aircraft opportunities



                                                  40
Today’s presentation


   •
  1 Virgin Atlantic’s 10 years in the Caribbean

   •
  2 Short-term outlook: an airline perspective
     - impact of a downturn on Leisure demand
     - the price of jet fuel

   •
  3 Longer term plans
     - new aircraft and market opportunities



                                                  41
Barbados, 27th September 1998
10 years of inaugural parties in the
Caribbean
2003: Tobago   2005: Cuba     2006: Jamaica
We now operate a total of 22 round-trips per
week to 8 points in the Caribbean
Virgin Atlantic in the Caribbean                     Key dates



                                                     • BGI: launched Sep’98
                                                        - now a daily service ex-
                                                          LGW
   HAV
                                                        - also served ex-MAN

                                                     • UVF: launched Sep’98
                                                          now 3 p.w.
           MBJ
                                                     • ANU: launched Oct’98
                  KIN                    ANU
                                                     • TAB/GND: launched May’03

                                                     • HAV: launched Jul’05
                                    UVF
                                               BGI   • MBJ: launched Jul’06
                                   GND
                                          TAB        • KIN: launched Oct’07

                                                                                    44
Virgin Atlantic has grown passenger numbers
to the Caribbean region every year since 1998
UK-Caribbean air traffic, 1997-2007 (pax p.a., m)                   CAGR: (2000-2007)




                                                              2.0   5.4%      Total
                                                        1.9
                                                  1.8
                                            1.7
                                      1.5                     0.7   15.9%     Virgin Atlantic
              1.4   1.4                           0.5   0.6
        1.3               1.3   1.3         0.4
  1.2         0.2   0.2               0.4
                          0.3   0.3


        1.3   1.2                           1.3   1.3   1.3   1.3   2.3%      Other airlines
  1.2               1.2   1.1   1.1   1.1



 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

                                                                    Source: CAA, Virgin Atlantic
The Virgin Atlantic Leisure model
works well in the Caribbean
•   Scheduled operation with large, efficient aircraft
     - full-service offering
     - year-round service
     - ambition to build frequency over time
•   Aspirational destinations with sufficient volume
     - UK- Caribbean is ideal sector length for maximum aircraft utilisation
•   Virgin Holidays plays an important role
     - reduces start-up risk
     - market knowledge
     - bottom line contribution
•   Broad & flexible distribution is a key feature of the model
     - limits exposure to specific market segments
     - reduces price pressure vs vertically integrated operators
Today’s presentation


   •
  1 Virgin Atlantic’s 10 years in the Caribbean

   •
  2 Short-term outlook: an airline perspective
     - impact of a downturn on Leisure demand
     - the price of jet fuel

   •
  3 Longer term plans
     - new aircraft and market opportunities
Overall demand for air travel is closely linked to
economic activity and GDP growth
Historical relationship between GDP & air traffic growth (RPKs)

  YoY change in                                                                                 YoY change in
  global GDP                                                                                      global RPKs
    8%                                                                                                        16%
    7%                                Global GDP                 Global RPKs                                  14%
    6%                                                                                                        12%
    5%                                                                                                        10%
    4%                                                                                                        8%
    3%                                                                                                        6%
    2%                                                                                                        4%
    1%                                                                                                        2%
    0%                                                                                                        0%
  - 1%                                                                                                        - 2%
  - 2%                                                                                                        - 4%
                                                   1992

                                                          1994

                                                                   1996
                1982

                       1984

                              1986



                                            1990




                                                                          1998
         1980




                                     1988




                                                                                        2002

                                                                                               2004

                                                                                                      2006
                                                                                 2000


                                                                                                         Source: IATA, OECD
There are not many encouraging signs in the
UK economy
Inflation          Unemployment      House prices     New car sales




   + 5.2%            1.79m              -15%             -23%
   • Highest for    • Largest rise    • Declining      • Fastest
     16 years         for 17 years      faster than      decline since
                    • Forecast 2m       any time in      1991
                      by Christmas      1990s crash
 In the last aviation downturn, Leisure volumes
 held up very well for Virgin Atlantic
Year on Year change in Virgin Atlantic passengers, 2000-2005 (%)

    20%

    15%

    10%

      5%                                                                      Leisure routes*
                                                                              Rest of network
      0%

    - 5%

   - 10%
              2000        2001        2002        2003        2004        2005

*Leisure routes defined as services to the Caribbean, Orlando and Las Vegas
Long-haul scheduled capacity and volumes are
much more stable than charter
UK-Caribbean passengers, 1997-2007, m


                      Charter                                                                                                           1.5
                                                                                                                1.4         1.5
                                                                                            1.4     1.4
                      Schedule
                                                                    1.2         1.2
                      d                                 1.2
                                            1.1                                                                       1.1         1.1
                          1.0                                                                     1.0     1.0
              0.9                     0.9
                                0.9               0.9
                    0.8                                       0.7                     0.7
                                                                          0.6




              1997        1998         1999        2000        2001        2002        2003       2004     2005        2006        2007
YoY change:
 Charter                   2%          -6%         -5%        -13%         -14%        12%        41%       1%          8%              1%
 Scheduled                12%          24%         10%         4%           3%          9%         3%       3%          2%              6%
Airlines are still battling the high price of fuel,
which is not fully recovered through surcharges
% increase in fuel cost (post-hedging) recovered through surcharges
(Jan05-Sep08, R12m)
  90%
  80%
  70%
  60%
  50%
  40%
  30%
  20%
  10%
   0%
                                                                                                                                  Jan- 07
                                                                                                                                            Mar - 07
                                                                                                                                                       May- 07
                                                                                                                                                                 Jul- 07
                                                                                                                                                                           Sep- 07
                                                                                                                                                                                     Nov- 07
        Jan- 05
                  Mar - 05
                             May- 05
                                       Jul- 05
                                                 Sep- 05
                                                           Nov- 05
                                                                     Jan- 06
                                                                               Mar - 06
                                                                                          May- 06
                                                                                                    Jul- 06
                                                                                                              Sep- 06
                                                                                                                        Nov- 06




                                                                                                                                                                                               Jan- 08
                                                                                                                                                                                                         Mar - 08
                                                                                                                                                                                                                    May- 08
                                                                                                                                                                                                                              Jul- 08
                                                                                                                                                                                                                                        Sep- 08
Summary of short-term outlook

•   The economic situation in the UK is different from anything seen in the last 15 years
     - almost all consumer indicators are showing negative trends
     - unemployment is rising and expected to increase further
     - reduced inflation may provide some relief in 2009
•   Despite this, forward bookings on Leisure routes are holding up well for Virgin
    Atlantic
     - reduction in competitor capacity is welcome relief for remaining airlines
     - the price of fuel remains a major concern; fare cutting is not a viable option
•   Long-haul leisure demand likely to hold up better than some other segments
     - longer booking window results in less volatility than business demand
     - short breaks likely to suffer before annual holiday
     - risk of switch to cheaper destinations
•   We are always looking at opportunities to optimise our Flying Programme
     - lack of aircraft deliveries mean that any additional flying has to come from within
       the existing fleet
Today’s presentation


   •
  1 Virgin Atlantic’s 10 years in the Caribbean

   •
  2 Short-term outlook: an airline perspective
     - impact of a downturn on Leisure demand
     - the price of jet fuel

   •
  3 Longer term plans
     - new aircraft and market opportunities
 Smaller, efficient aircraft are the key to Virgin
 Atlantic’s future expansion on Leisure routes
787-9                                               747-400




                                           versus




• c. 300 seats in Leisure configuration             • 452 seats in Leisure configuration
• 15 aircraft on order                              • 8 Leisure aircraft in the fleet
    - delivery originally scheduled from                - average age = 8.9 years
      2011
                                                    • Range = c. 13,500km
• Range = c. 15,000km


        Fantastic seat economics                         Fantastic seat economics
                  AND                                               BUT
        Opens up smaller markets                      Limited number of viable markets
The Caribbean will be competing against other
destinations in Virgin Atlantic’s expansion plans
Top 25 long-haul leisure markets, UK-World, in 2007 (‘000 pax sectors p.a.)


 2795

                    Current Virgin Atlantic route      Future Virgin Atlantic route?
    1830


        856
                  639
                     357        233     223209185143                           99
  Puer t oPlat a




        Havana
      Maldives
     Mont ego
             Goa
        Ant igua



       St Lucia




         Tampa
   Punt aCana




    Mombasa
     Var ader o
           Dubai

          Miami




          Banjul
      Bangkok

    LasVegas
        Or lando




        Cancun




  Por t of Spain




        Nassau
     Kingst on




        Holguin
    Bar bados




    Maur it ius
   Vancouver




                                                                                 Source: CAA

								
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