Strategic Analysis of Virgin Atlantic: Pre-COVID Market Strategies

This case study provides an in-depth analysis of Virgin Atlantic's strategies based on the market conditions of 2019, utilizing analytical tools such as SWOT, PESTLE, and Porter's Five Forces. It examines the company's strengths, weaknesses, opportunities, and threats, highlighting the impact of factors like Brexit and the COVID-19 pandemic. The analysis covers national strategies, such as the failed Little Red domestic airline operation, and international strategies, including partnerships with airlines like Air China and Singapore Airlines. The study further discusses how Virgin Atlantic can adapt to the post-COVID-19 environment by focusing on cost reduction, digital marketing, and optimizing its network and fleet, emphasizing the importance of aligning plans with global market demand and supply to ensure profitability and sustainability.

Contents
Question 1........................................................................................................................................1
Question 02......................................................................................................................................4
Question 03......................................................................................................................................6
References........................................................................................................................................8
Appendices....................................................................................................................................11
SWOT Analysis- Appendix 1....................................................................................................11
PESTLE Analysis – Appendix 2...............................................................................................12
Porters five forces analysis – Appendix 3.................................................................................13

Question 1
Virgin Atlantic is a British airline which was established in 1984 as British Atlantic Airways by
Richard Branson, Randolph fields and Alan Hellary. The airline company is a long haul carrier
with a fleet of 45 (planned to cut down to 35) and flies from UK to the US, Asia, Africa and the
Caribbean and has key bases in Manchester, Gatwick and Heathrow. The company is controlled
by Virgin Atlantic limited which is a holding company and 49% of this holding company is
owned by delta airlines and 51% is owned by Virgin Group (Corporate.virginatlantic, 2021). The
vision of the company is to be the most loved travel company and the mission of the company is
to embrace the human spirit and let it fly; this mission statement of the company is devised from
the core values of the organization which are inclusiveness, optimism and adventurousness. The
company generally targets customers who are business travelers and the segmentation clearly
shows that middle class or upper class individuals are the primary target customers for Virgin
Atlantic. The major competitors for the company are Emirates and British Airways (Seatmaestro,
2021). The COVID-19 pandemic has had a huge impact on the profitability of airline companies
and Virgin Atlantic has experienced a big fall in profitability as a result, the company filed for
bankruptcy protection from creditors in US On August 4th 2020 (Rushe, 2020).
In order to recognize possible national and international strategies that Virgin Atlantic could
utilize based on the market conditions of 2019, the internal and external environment of the
company as well as the industry has to be analyzed. Analytical tools such as SWOT, PESTLE
analysis and Porters Five Forces have been utilized in order to determine useful national and
international strategies for Virgin Atlantic for the year 2019.
The SWOT analysis as mentioned in appendix 1 elaborates on the strength and weaknesses of
the company from an internal point of view as well as the opportunities and threats of a company
from an external point of view. With regards to strengths of Virgin Atlantic, perhaps the biggest
strength of the company is the excellent advertising and innovation led by the founder of the
company Sir Richard Branson. Through the leadership of Sir Richard Branson, Virgin Atlantic
has established a strong brand value with high brand recall (Feloni, 2015). Furthermore, the
company has a very strong Atlantic network, highly efficient services and customer base that is
satisfied and always prefer to fly Virgin Atlantic. The company also has a good public image due
to high involvement in corporate social responsibility activities led by Sir Richard Branson

(Dailey, 2016). The company also has strategic partnerships with companies such as Air China
and Singapore Airlines which enabled the company to access these markets and increased
profitability (Virgin Atlantic, 2021).
With regards to the weaknesses off the company, as per Gill (2020), the biggest strength off the
company which is the innovation and leadership ability of Richard Branson, could also be seen
as a major weakness as the company is extremely dependent on one individual and this does not
bode well for the future, the company could face a tough time after the exit of Sir Richard
Branson. Virgin Atlantic also faces difficulties in raising capital since it is privately owned and
as a result also lacks a global presence which competitors such as British Airways, EasyJet and
Emirates have. The high competition in the airline industry coupled with the fact that Virgin
Atlantic is a private company with limited global presence makes it extremely difficult for the
company to grow and increase their market share. Virgin Atlantic also has a poor record in its
profitability, recording losses in most of its years furthermore projects such as little red which
was a domestic airline operation; have been big failures which makes it hard for the company to
attract investors when they want to start up new projects. In relation to opportunities and threats,
the fact that Virgin Atlantic is a joint venture with Delta Airlines could drive cost synergies
which could be beneficial over time, Similarly Virgin Atlantic also has the opportunity to join
global alliances which could benefit the company in the long run. The company is also facing
some threats such as North Atlantic overcapacity which could cause a supply-demand imbalance
and have also faced problems due to Brexit and climate change (Caswell, 2021).
The PESTLE analysis which can be seen in appendix 2, identifies many external factors which
could impact the organization. The political environment of the UK; the country in which the
organization is based, has a large impact on the profitability of the company. Issues such as
Brexit and political instability have had a negative impact on Virgin Atlantic. Technological
factors play another major role as technology is vital in the Airline Industry since continuous
improvement in cost reduction and safety standards is what drives companies operating within
this industry, the current advancements in technology and digitization has driven air travel and
Virgin Atlantic has many opportunities to capitalize in this regard (BBC, 2020). Legal and
environmental factors are also extremely important to Virgin Atlantic as copyrights, patents and
data protection laws are crucial for ensuring safety of passengers as well as the ethical

responsibility of the company. Since the airline industry also has high impact of carbon
emissions to the environment it is the responsibility of the companies operating within the
industry to address these environmental issues both for the benefit of themselves as climate
change is detrimental to air travel; as well as everyone else (Nugent, 2021).
The porters five forces analysis (Appendix 3) concludes that the power of suppliers is high, the
power of buyers is moderate, the barriers to entry is extremely high and the threat of substitutes
is extremely low. Furthermore, the industry is extremely competitive ever since the emergence of
low cost carriers and tight regulations which leads to high operating expenses.
In terms of national strategies, the company has already invested in strategies such as Little Red
which targeted UK domestic mainland flights, however it lasted only three years until operations
were ceased. This was due to poor planning as the company were not able to sell enough seats to
make the flights profitable (Finlay, 2021). However, since the internet penetration rate and social
media platforms have become immensely popular over the last five years, it could be a viable
option at present to launch a project such as little red with increased focus on digital marketing
which is an extremely cost effective form of marketing. Furthermore, a domestic airline with
destinations throughout the UK could act as a feeder airline for Virgin Atlantic’s long haul
holiday destinations.
In terms of international strategies, the company needs to respond to increased competition from
low cost carriers; the company should focus on reconfiguring economy class cabins and
providing more benefits to potential customers in order to ensure customer retention,
Furthermore the company can tap into new markets and obtained cost benefits through
international partnerships with other organizations such as they already have with Air China and
Singapore Airlines.

Question 02
The prevailing international market conditions are relatively unfavorable at the moment due to
the COVID-19 pandemic and opportunities in the airline industry are limited, however as more
and more individuals get vaccinated and borders begin to open up Virgin Atlantic will once
again be presented with opportunities to expand its airlines and Holiday Company, which is
closely linked to the airline business. The company has to focus on marketing and specifically
digital marketing as it is a cost effective form of marketing which has the potential to reach a
large audience (Branson, 2020). Due to the rising internet penetration rate in most nations across
the world, an effective marketing strategy could help the organization attract more customers as
currently people are skeptical regarding cross border travel (B, 2021). Through an effective
marketing campaign Virgin Atlantic would be able to alleviate the public's concern regarding
cross border travel and promote destinations which are safe for travelers and this could align
with the Virgin Holiday company aims and prove to be mutually beneficial for both companies
under the Virgin Holding Group.
It is important that Virgin Atlantic’s strategy for the next five years to align with the post
COVID future of the globe, COVID-19 has had a severe impact on the global economy as well
as travel and aviation and there is an immense level of uncertainty regarding future in the next
few years therefore Virgin Atlantic should take decisive measures to minimize costs, preserve
cash and protect jobs of its employees as well as explore options to obtain external funds. In
order to do this Virgin Atlantic should optimize its network and simplify its fleet; this can be
done through flying wide body twin engine aircrafts from London and Manchester to the most
popular locations for the company such as Las Vegas, Los Angeles, Boston the Caribbean and
Malaysia. The company has already made plans to retire large aircraft such as 747-400S and
330-200 aircraft by 2020 in order to build a greener fleet which will reduce carbon emissions by
10% (Clarkson, 2020).
It is critical for Virgin Atlantic to take advantage of its partnership with Delta Airlines which is
one of the leading airline companies in the USA, the company should take advantage of this
partnership to optimize its flights to North America and focus on popular holiday destinations in
North America such as Los Angeles, Bahamas, Bermuda, Jamaica and Hawaii. The company has

already introduced destinations such as Mumbai and Tel Aviv from London Heathrow, However
the company should focus on adding popular destinations Such as Sydney, Vancouver, Athens
Kingston, Nairobi, Dubai, Chicago and Detroit (Virginatlantic, 2021).
Ultimately if these plans are implemented effectively Virgin Atlantic would be able to return to
profitability post COVID-19. The key area of focus when devising these strategies should be
alignment of plans with the global market the company should effectively assess demand and
supply when formulating relevant strategies. at present since it does not seem like the demand for
travel would increase too significantly in the next few years, the company should focus on
quantity and cost effectiveness as well as digital marketing to acquire new customers. Virgin
Atlantic has already made plans to reduce its fleet size from 45 to 35, therefore they should aim
to fill planes with passengers operating to move popular destinations which are not currently
utilized by the company

Question 03
Virgin Atlantic are already facing many challenges due to external factors; these challenges
include Brexit, which was caused by political factors; as well as COVID-19 which was caused
by natural factors. In order to implement strategies successfully, the organization would have to
face these challenges and overcome them. Brexit would not affect Virgin Atlantic normal flight
operations since open skies agreements have been signed between UK and US as well as China
and India which are key markets therefore passenger flights will continue to operate as normal
and would not be affected by Brexit (Virgin Atlantic, 2021). Furthermore, at present Virgin
Atlantic doesn’t operate any direct passenger service between UK and any other European
nation, it would be more challenging to establish this direct passenger services from UK to other
European nations due to Brexit, therefore this would be a significant challenge if the company
were to try and implement it in the future. However, since the aviation industry is extremely
dependent on political factors Brexit will have a large impact on Virgin Atlantic as it has
destabilized to a certain level the UK economy, which is the home country of the company; this
destabilization has led to increase in fuel prices as well as shortage in labor as it would be more
difficult for individuals from other European nations to work in the UK.
The Sudden and significant drop of demand for air travel caused by the COVID-19 pandemic has
had a negative impact on the profitability of most organizations in the aviation industry; this
dramatic drop in demand has put liquidity buffers of airline companies under pressure and due to
this uncertainty airline companies such as Virgin Atlantic face two major issues which are costs
incurred due to health measures and loss of demand due to international travel restrictions. Cost
of health related measures include operating costs which organizations will have to incur due to
added health and safety requirements such as temperature checks, hand washing stations,
disinfectant and hand sanitizers as well as cost incurred due to social distancing measures such as
reduction in passenger load by either 25% or 50% (OECD, 2020). It is also unlikely for the
demand to rise significantly in the coming years even after the crisis has been averted due to the
lasting economic impact of the crisis which has caused a fall in consumer income as well as fear
regarding safety in the minds of the consumer. This combination of negative supply and demand
as well as uncertainty regarding the outlook of the near future has left airline companies such as

Virgin Atlantic with confusion and uncertainty regarding the near future therefore it is important
for the company to move forward with caution and utilize effective strategies to ensure that
profitability is achieved.
The company had already been losing money due to failed projects such as little red in an
extremely competitive airline industry even before the COVID-19 pandemic hit; this is the
reason why the company agreed a rescue deal which was worth 1.2 billion pounds in order to
secure its future beyond the coronavirus pandemic (Rushe, 2020). A combination of Brexit and
COVID-19 pandemic has led to a very challenging period of years for Virgin Atlantic, however
it is not too bad since most companies operating in the aviation industry have been heavily
impacted and direct rivals of Virgin Atlantic such as British Airways have also suffered due to
Brexit and COVID-19. In order to overcome these challenges, it is important for the company to
look within itself and identify the strengths of the company this include the branding the
marketing and the public image of the founder Richard Branson which is extremely positive due
to CSR activities amongst other factors, these strengths should be considered when formulating
strategies to overcome challengers caused by Brexit and COVID-19. The company would also
need to ensure that investors are confident in the ability of the company to make generate a
return, especially after the Little Red debacle, this would also act as a major challenge when
starting new projects which require capital therefore the organization should ensure effective
communication is maintained with investors and any future projects are thoroughly planned and
researched before they are implemented.

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Appendices
SWOT Analysis- Appendix 1
Strengths
1. One of the largest British airlines and has over 35 destinations.
2. Satisfied customer base with good customer retention rate.
3. Efficient service and strong foundation.
4. Strong brand presence and marketing.
5. Strong leadership led by Richard Branson.
6. High brand recall.
Weaknesses
1. High competition.
2. Relatively low global presence.
3. Dependency on Richard Branson.
4. Private ownership causes difficulty in securing capital.
Opportunities
1. New runway at London Heathrow Airport.
2. Partnership with delta airlines.
3. New routes and destinations.
Threats
1. Overcapacity in North Atlantic root
2. High competition
3. Brexit
4. COVID-19
5. Climate change