Feb. 6 (Bloomberg) -- Virgin Atlantic Airways Ltd. is spending 100 million pounds ($158 million) revamping its premium cabin to fend off British Airways and American Airlines.
The carrier, controlled by billionaire Richard Branson, will unveil a new menu in its Upper Class service starting next month featuring a cheese trolley, Lanson Black Label Champagne and afternoon tea, the Crawley, England-based company said in a statement today. Virgin Atlantic is also opening a bigger lounge at New York City’s John F. Kennedy airport in March.
Virgin Atlantic is facing increasing competition on its core London-to-New York route after International Consolidated Airlines Group SA’s British Airways and AMR Corp.’s American Airlines won antitrust immunity 18 months ago to start a joint venture, allowing them to coordinate schedules and prices.
“Fifty percent of our business is across the North Atlantic and the London-New York route is highly competitive because BA and AA have joined together,” Greg Dawson, a Virgin Atlantic spokesman, said by telephone. “Whilst we’ve maintained our market share quite well, we want to keep innovating because our clear point of difference is product.”
Virgin Atlantic has 20 percent of the London-New York market, even with a smaller share of the takeoff and landing slots, Dawson said. The carrier also flies to Newark Liberty International Airport, across the Hudson River from Manhattan, from its main London Heathrow base.
New York Spa
IAG and American Airlines won antitrust immunity to run a joint business on their North Atlantic services in July 2010. Branson said at the time that the carriers would use the venture to stifle completion.
The new lounge at JFK, designed by New York architects James and Hayes Slade, will be twice the size of Virgin’s existing suite at the airport and feature a spa. The airline’s upgrade of its Upper Class product will also include “enhanced” seats and an improved bar area, Dawson said.
Virgin Atlantic trails British Airways in the Skytrax World Airline Star Rating program, scoring three stars compared with British Airways’ four. The ratings, established in 2000, are based on an audit program that assesses elements of an airline’s product and service such as seat standards and in-flight entertainment.
British Airways also won the organization’s award for the World’s Best Business Class Airline Lounge for 2011 for its lounge at Heathrow airport’s terminal five.
IAG was trading 2.1 percent lower at 185.80 pence at 2:28 p.m. in London. Shares in the company, which also owns the Madrid-based Iberia brand, have advanced 26 percent this year, boosting IAG’s market value to 3.45 billion pounds. Virgin Atlantic is closely held.
Virgin Atlantic will roll out the changes on Airbus SAS A330 wide-body planes linking Heathrow with JFK and on future aircraft assigned to the route. Retaining its share of the business-traveler market is crucial for the carrier, said John Strickland, an aviation analyst at JLS Consulting in London.
“It isn’t an airline that’s going to make high margins filling economy class,” Strickland said by telephone. “Their business model absolutely relies on the high-yielding business segment. It’s key to their survival.”
Trans-Atlantic business-class bookings have begun strongly in 2012, Virgin Atlantic said, with growth of more than 10 percent on London-New York flights.
“The irony is that the hard-pressed economy passenger doesn’t get very much these days,” Strickland said. “But airlines feel that they can’t justify the business fares if they don’t make these sort of things part of their offering.”
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