Sunday 23 October 2016

Branson wants a level playing field but won't buy Aer Lingus

James Quinn

Published 14/06/2015 | 02:30

Sir Richard Branson wants greater competition to allow Virgin Atlantic to thrive
Sir Richard Branson wants greater competition to allow Virgin Atlantic to thrive

Sir Richard Branson may be many things, but he is nobody's fool. Flying to Detroit on Virgin Atlantic's inaugural flight to the Midwestern American city, he let rip about his true feelings with regards to International Airline Group's pending takeover of Aer Lingus.

  • Go To

The Virgin founder admitted his own airline - in which Virgin Management owns a 51pc stake, with Delta owning the remaining 49pc - had even considered making an approach for the Irish flag carrier.

That may have been the case.

Maybe. For a moment.

But given the recent problems Virgin has had in launching and then closing its British domestic Little Red venture - which was only in the skies for 24 months - it seems unlikely that Virgin craves a largely domestic carrier.

Sure, Aer Lingus has a decent trans-Atlantic service that could slot into Virgin's long-haul network. But it also has a relatively old fleet, and its customer service is far from what the British carrier prides itself on.

No, Sir Richard's entry into this debate is, it can be argued, an attempt to queer the pitch when it comes to what looks to be a home run for IAG's €1.4bn takeover of the Irish airline.

Despite Ryanair's bleating that the UK's Competition and Markets Authority's decision to force it to cut its 29.8pc stake in Aer Lingus down to 5pc - a move that would pave the way for IAG's takeover - is "ridiculous", chief executive Michael O'Leary is effectively playing for time, and maybe a slightly higher take-out price.

Ryanair owns a 29pc stake in Aer Lingus, which it has been ordered to reduce to 5pc

The CMA's decision has been upheld by the British courts on more than one occasion, and O'Leary is unlikely to succeed at the Supreme Court.

As a result, Sir Richard's words are meant to fall not on the ears of Aer Lingus shareholders but on the ears of aviation regulators, and the British Government, as Virgin fights for a greater piece of the pie at Heathrow.

The airline, like the majority that fly from there, feels constricted by the antiquated set-up that restricts the number of flights it can host at the west London airport.

In making the comments, the bearded billionaire knows exactly what he is doing.

Sir Howard Davies' Airports Commission is in its final throes, although the government's response and final decision may not be known until the new year.

But the decision as to where a new runway will be sited is of far greater interest to Sir Richard - who remains president of Virgin Atlantic - than who owns the Irish airline.

A third runway at the UK's premier hub will increase capacity and ensure that Virgin can increase the amount of passenger traffic it funnels through the country's busiest airport.

With a new runway would come new take-off and landing slots, which would be music to Virgin's ears.

IAG, through its ownership of British Airways and Iberia, controls 51pc of the slots at Heathrow. Aer Lingus controls a further 3.5pc, and IAG's One World partner, American Airlines, controls a further 2pc, giving a potential 56.5pc - a dominant holding in anyone's book.

Despite being the second largest slot holder, Virgin is now in a position whereby it must pull a route if it wishes to fly to a new destination.

So as part of its greater integration with Delta, in order to fly to a larger number of US cities such as Detroit, it first had to stop flying to less profitable destinations, including Tokyo and Mumbai, which it only began flying to again - for the second time - in October 2012.

Sir Richard is only too painfully aware of this, and has long called for a more level playing field at Heathrow.

And he is right to do so, for it would benefit not only Virgin but all the airlines who have tried - and failed - to get slots at the airport.

Wouldn't it be a good idea, were the British government to pick Heathrow - as many expect, for the location of a new runway in the south-east of England - that alongside it a shake-up of the archaic slots system was announced?

Much of the debate around runway expansion has centred on questions of the movement of trade and people, and how the UK can compete on a world stage.

That argument is valid, but becomes moot if the country's main airport is subject to a stranglehold from its former flag carrier.

Surely it would be better for the decision on a new runway to come alongside a move to shake up the way our major airports operate.

Even now, some airlines are already circumventing the UK by funnelling passengers through Amsterdam's Schipol, Paris's Charles de Gaulle and Dublin Airport. This is a worrying trend which will only worsen if Heathrow is chosen on the same slots system that has existed for decades and led to the dominance of one increasingly powerful player at the risk of greater competition.


Sunday Indo Business

Read More

Promoted articles

Editors Choice

Also in Business