Virgin Atlantic Airlines

Executive Summary

The aim of this write up is to provide a brief overview of Virgin Atlantic Airlines, its purpose, mission and vision statement. The key stakeholders of the VAA and the duty of care VAA owes to these stakeholders are analysed. Being a global service provider, Virgin Atlantic & British Airways are affected by various political, socio-economic and technology factors and these are reviewed. The macro economic factors, such as fiscal & monetary policies and how it affects these airlines are studied. Furthermore, the impact of EU on the airlines industry and BA & VAA in particular are detailed.

1A Introduction:

In the United Kingdom, the Virgin group is a very popular and preferred brand. Virgin Atlantic is a subsidiary of the Virgin group and is one of the major airlines in the UK led by Sir Richard Branson where the Virgin group owns 51% of the shares and the remaining 49% owned by Delta Airlines, USA. The mission statement of Virgin Atlantic is “to embrace the human spirit and let it fly”.

Virgin Atlantic operates short and long haul flights across 35 different destinations covering the Americas, Europe, Asia Pacific, Middle East, Far East and Australia.

Purpose of VAA (Virgin Atlantic Airlines)

In 1984,Sir Richard announced his decision to operate Virgin Atlantic Airlines that would provide world class quality and great value for money. By the end of the 80’s there were more than one million loyal passengers travelling with VAA, one of the first airlines to provide individual TV screens for the passengers.

In the 90s, the business developed further given the competitive pricing, the unique service offerings and the introduction of the Premium economy was a great hit with the customers. In 1999, 49% of Virgin Atlantic’s shares were sold to Singapore Airlines.

VAA vs Fire Services

Virgin group is one of the well-known business establishments and the purpose of VAA is to expand the service line offering of the business in order to earn profits. Unlike the fire services, which is used to cater to the emergency needs of the people of the country and safeguarding them, the primary purpose of VAA is to be able to cater to the travel demands of the public and to be able to run it as a marketable business. Keeping this in mind, the main objectives of VAA is to earn profits and be able to service the customers in an effective way to ensure customer loyalty is maintained. As opposed to the fire services, the VAA faces stiff competition from various other airlines. The key accountability for VAA would be towards its customers and key stakeholders including the board of directors and the shareholders whilst the key accountability for the fire services would be to that of the general public by ensuring that there is transparency and all funds allocated by the government are used in an appropriate manner.

The services offered by Virgin Atlantic caters to the luxury and travel needs of the people and the services offered by fire services are basically around protecting the people, responding to emergencies and also improving the safety within local communities.

Virgin Atlantic Stakeholders, Strategies and Responsibilities

Virgin Atlantic has various key stakeholders and owes a duty of care towards all the key stakeholders. To be able to manage all the stakeholders and to ensure that they are happy, Virgin Atlantic has various policies.

The key stakeholders of Virgin Atlantic include:

Shareholders;
Customers;
Employees;
Vendors;
Government Agencies;
NGOs;
Community at large.

To ensure that the shareholders are satisfied, VAA achieves its primary objective of earning profits and ensuring that all the shareholders receive a good Return on their investments.

Customers are given world class treatment and Virgin Atlantic is very well-known for their quality customer services. Customers always come first with Virgin Atlantic and this has been a new concept in the airlines industry. A good in-flight entertainment service, VIP treatment for first class customers including opting for a beauty therapist, check-in by chauffeur to avoid waiting in the queue, flexible meal service options etc, are examples of customer care standards that have been set by the airlines. VAA also takes customers safety seriously.

Employees who form the integral part of the VAA community and VAA is committed to serve its employees better. Good work is recognised by the rewards and recognition program and Virgin Atlantic provides world class training to all its employees. Virgin Atlantic has a good diversity policy and is strictly against discrimination. All employees are treated with respect and honesty. Equal opportunity is provided to all employees and potential candidates who aspire to become a part of the Virgin Atlantic team.

Vendors play a key role in the Virgin Atlantic community. Virgin Atlantic has strict policies about creating lasting relationships with vendors and aims at sourcing goods responsibly. All suppliers are thoroughly screened to ensure that key international standards such as Human Rights Convention by UN and International Labour Convention laws are met.

Environment & Community: As its commitment to the environment, Virgin Atlantic has incorporated ‘Change is in the Air’ (CIITA) strategy which aims at reducing carbon footprint by using novel technologies and fuels to increase efficiency. Virgin Atlantic is keen on becoming energy efficient and sources sustainable energy where possible. It has a strong recycling and reuse policy which reduces waste and ensuring sustainability.

1B: Impact of Fiscal & Monetary Policies on VAA

Fiscal policy can be defined as the policy whereby the governments change the levels of tax and its spending in order to have a positive impact on the nation’s economy. It helps redistribution of wealth, decreases in unemployment rates and provides a way to effectively control the economy.

Fiscal policies can either be expansionary or reductionary. An expansionary fiscal policy encourages the growth of the economy by means of expanding the supply of money to combat inflation. This can be done either by cutting down taxes or by increasing the spending of the government (Chambenlin 2009).

Fiscal policies are effective when it comes to reduction of unemployment in the shorter term. However, in the long-term they cannot bring in much change as the supply curve is vertical and pushing the demand curve would lead to pushing in the prices, which results in inflation (Gillespie, 2008)

Monetary policy on the other hand can be defined as the action that is taken by the central bank or other financial regulators to determine the rate of growth of money supply. It also influences the demand and supply of money as it impacts the interest rates (Chambenlin 2009).

The recession has had a very bad impact on Virgin Atlantic. The increase in the competition in the transatlantic services and given the rise in the fuel prices, the airline has seen a loss of ?135m. The airline has also frozen salaries of employees for the current period and has cut over 600 jobs which accounts for 7% of its workforce.

Virgin Atlantic has not planned clearly and anticipated the costs. If the planning had been done effectively, Virgin Atlantic would not be facing issues due to increase in fuel prices. Oil is one of the key costs that is incurred by Virgin Atlantic and hence it has a serious impact on the Airlines. Also, in the recession of 2008, there has been a decrease in the passengers for long-haul flights which combined with the oil price has led to a loss of ?150m in 2009.

Virgin Atlantic can take advantage of the expansionary fiscal policy whereby there is a cut on taxes and the expansionary monetary policy on the reduction in the interest rates as opposed to contractionary monetary policy. Reduced tax rates would help Virgin Atlantic transfer the reduced costs to the customers and expansionary monetary policy would help reduce exchange rates which would therefore help Virgin Atlantic to export oil at reasonable costs. Given the poor demand for travel due to increase in costs, Virgin can make use of the savings that it has achieved by using expansionary monetary and fiscal policies by slashing down the costs of travel, which would promote and encourage more customers to use their services.

Though VAA has been hit by recession, making use of these policies should enable Virgin to regain some of its losses.

1F Benefit for Virgin Atlantic through International Trade

Being a global brand servicing various destinations has been a key benefit for Virgin Atlantic as well as British Airways. There are various advantages of International Trade for Virgin Atlantic. These include:

Increase in profits: International trade and servicing various locations globally has led to increase in profits for Virgin Atlantic and British Airways.
More Sales: Having been a success in the UK and the second largest Airlines in the UK, global destinations and international trade were the next logical steps which increased the sales and turnover of Virgin Atlantic. The same holds good for British Airways.
Dependence on one market reduced: International trade helps reduce dependence on one local market. If due to various reasons one market segment fails, another segment can be used thus reducing sole reliance on specific market segments.
Better competitiveness in local markets: Serving international destinations and becoming a global brand has increased knowledge, services and experiences for Virgin Atlantic which makes it a very tough competitor amongst local airlines. Expansion into the international market also gives British Airways and Virgin Atlantic new ideas to be able to satisfy all their key stakeholders, good marketing techniques to promote their ideas and better customer services.
Market diversification: Diversification into the global markets has helped BA & VAA to be able to leverage better its resources and make use of booming markets in a bad economy.
1G Global Factors Affecting BA/VAA

Both British Airways and Virgin Atlantic are global brands operating on various international locations. There are various key factors that affect the operations of both BA and VAA which relate to the global factors.

Political Factors

Airlines industry is highly regulated by governments and there are various laws that determine where the airlines can fly, the services offered, planning, their policy and strategies as well as pricing. For airlines to be in the business it is mandatory for them to adhere to these rules and regulations. Thus, compliance is one factor that affects both British Airways as well as Virgin Atlantic.

Since both British Airways and Virgin Atlantic operate both nationally and globally there are pivotal national and international laws and obligations, such as H&S regulations, security legislations, taxes etc. For instance, the VAT that has been increased to 20% would affect the stakeholders of both Virgin Atlantic and British Airways. There are various operating restrictions due to political factors. One way to overcome these restrictions is to have tie ups with national carriers. Thus, political factors have a great influence on the operating environment of the airline industry.

Economic Factors

Recession, and the cost of fuel, and other economic factors, such as cost of having empty seats play a major role which affects the activities of Virgin Atlantic and BA.

Global economic markets, strong/weak home currency influences the costs of travel. In a bad economic situation companies might tend to cut down on their travel costs and discourage employees from taking a flight. An increase in the price of the fuel might force BA & Virgin Atlantic to transfer its costs to the end customers making it more difficult for people to afford. Any fluctuation in the oil price will have a direct impact on the currency which in turn impacts the cost of flying for both British Airways and Virgin Atlantic.

Social Factors

International airlines, such as British Airways and Virgin Atlantic, that serve various nations need to understand the social and cultural values of the destinations served in order to be able to successfully drive the business. Social and cultural values encompasses all aspects of understanding the special needs of the destination, the key holidays and any special arrangements that might have to be taken into account while serving a specific destination. For example, the meal choices have to be restricted to non-pork based foods whilst serving Muslim nations to not only ensure the sentiments are catered to and also to drive business in these locations.

Technology Factors

Technology provides a competitive advantage to businesses and there is an increasing demand for the use of the latest technology to enable customers to get a better experience. Having a good e-commerce application to provide customers a portal to purchase tickets, fast check-in services online would be useful as it would cater to the more tech-savvy and young customer base. However, British Airways and Virgin Atlantic should make sure that they are not overly reliant on using high-end technologies as this might lead to the isolation of certain groups that are not entirely comfortable using these high end technologies. BA & Virgin Atlantic should therefore find a good balance between these two and should be able to optimise the use of technological advancements and leverage the opportunities appropriately.

1H Impact of EU on BA & VAA

The EU has a great impact on both British Airways and Virgin Atlantic. The EU has enabled an increase in competition in the market. An increase in the competition and a market promoting a healthy competition would now mean that both BA and VAA have to face a lot of competition from various operators within the EU. Hence, in order to be able to successfully steer the business, it is key that BA & VAA keep their prices at check, increase their value added services, and build on their brand value and their unique selling point to ensure customer loyalty and also to attract more customers.

The EU has various positive impacts on BA & VAA. Tourism is the third largest sector in the EU and there is a lot of scope for development. EU has had talks with the aviation industry to promote sustainable and reliable services within the EU and BA & VAA can take advantage of this to provide high quality services to the customers.

The EU has relaxed its visa policies for member states and also promotes fair international trade system that improves competitiveness and has opened up its markets by unblocking tariff and non-tariff barriers making. This promotes trades and import and export of goods and services. Indirectly this help travel to and from various European Union nations. This can be used by British Airways and Virgin Atlantic to offer specialised services to businessmen and frequent flyers to and from Europe.

Relaxing trade restrictive measures means that there are various political factors that are relaxed and this paves way for better collaboration and negotiation. Opening up the markets would mean that the procurement of goods and services can be accessed and available freely across EU without restrictions. This removes any legal and regulatory obstacles that British Airways and Virgin Atlantic faces and helps promote growth and sales in the industry. Increased competitiveness within the EU would mean access to better services, keeping prices in check and ensuring that the brand value is maintained.

Conclusion

This paper helped to identify the vision and the mission statement of Virgin Atlantic, how it is different from other services. It identified the key stakeholders of the airlines and the responsibilities of Virgin Atlantic towards its stakeholders were discussed in detail. The fiscal policies and monetary policies were then explained and how these related to Virgin Atlantic were also specified.

A PEST (Political, Economic, Social & Technology) factor analysis was done in order to understand various global factors that affected Virgin Atlantic & British Airways. Finally, the impact of the EU on BA & Virgin Atlantic was discussed in terms of competition, trade restrictions and markets.

Works Cited

Virgin Atlantic. (2014, September 2014). Retrieved on 06/09/14 from http://www.virgin-atlantic.com/us/en.html

Investopedia. (2014, September 2014). Retrieved on 06//09/14 from http://www.investopedia.com/terms/e/europeanunion.asp

European Monetary Policy. (Septmber 2014). Retrieved on 06/09/14 from http://dictionary.reference.com/browse/european+monetary+union

Chamberlin, G. (September 2009). Economic Review Sep 2009. Economic and Labour Market Review

Gillespie, A. (June 2009). Foundations of Economics. New York; Oxford University Press

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