It looks like the days of independence for London-based carrier Virgin Atlantic may be coming to an end. Speaking in an interview with Bloomberg in Mumbai on Friday Richard Branson indicated that the carrier is looking to join up with one of the big three and that "to survive we need to have an alliance." So, which will it be??
There’s virtually no chance of oneworld being the alliance. The vicious competition between Virgin Atlantic and British Airways, as well as the massive domination at Heathrow, simply exclude that from reasonable consideration. Singapore Airlines holds a huge minority stake (49%) in the carrier and Singapore is a member of Star Alliance. But that doesn’t necessarily mean they would join up. In some ways it is better for Singapore Air to have the diversity of their investments in both alliances rather than just one.
There are two levels of membership in the alliances these days; which level of participation Virgin is looking to reach could drive which they ultimately join. As just a member the competition issues are relatively minimal. There will be codesharing and frequent flyer reciprocity but that won’t severely shift the competitive balance in the market. If Virgin is looking to join one of the Anti-Trust Immunity (ATI) agreements, however, that will likely change things significantly.
Getting in to the ATI will require approval from government authorities on both sides of the Atlantic. Those approvals are rather more strict and look at the competitive balance more significantly. At first blush SkyTeam is more likely the winner if ATI membership is desired. Star Alliance has many more destinations in North America served from London than SkyTeam does. And Virgin’s lack of short-haul service means that, for the ATI, it is all about London.
Keep your eyes and ears open on this one…it will be interesting to watch.
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