REINVENTING Virgin Atlantic – A True Story
The Past
According to AP: “On Sep 4, 2020, Virgin Atlantic (VA) completed its 1.2 billion-pound ($1.6 billion) restructuring plan. The airline announced the refinancing package in July to ensure its survival after passenger numbers dropped 98% in the second quarter. It includes 600 million pounds of support from the airline’s owners, Virgin Group and Delta Airlines, 450 million pounds of deferred payments to creditors and 170 million pounds of financing from U.S.-based Davidson Kempner Capital Management LP.
Virgin Atlantic, founded in 1984 by Richard Branson’s Virgin Group, has already cut 3,550 jobs, shuttered operations at London’s Gatwick Airport and announced plans to retire 11 aircraft as it seeks to weather the slowdown in air travel. The airline says it doesn’t expect passenger volume to return to pre-pandemic levels until 2023.
Delta invested $360 million in Virgin Atlantic in December 2012, acquiring a 49% stake in the airline. Virgin Group owns the remaining shares”
As soon as I heard the news, I contacted VA’s CEO, Shai Weiss, and issued a LinkedIn invitation to connect. It was accepted, so I immediately followed up and offered my sincerest congratulations. And I wrote:
“Shai, thank you for connecting via LinkedIn. As mentioned in my short message, Virgin has one of the strongest brand recognition. However, as all the airlines struggle to recover from COVID19, your Factor Endowment is Richard Branson - the man who understands Branding & Marketing BETTER than anyone else!! He has been my mentor for years and my favourite quote of Richard Branson is: "Always shoot for the moon. Even if you miss, you end up among the stars!”
IMHO, Virgin can bring radical innovation to the airline industry. Please note that I join Advisory Boards to structure innovative JVs in 90 days. It’s a UNIQUE PROCESS - just as I did w/ Verizon 20 years ago. Let me help… Thank you”
One week passed and after not hearing back from Shai, I sent another message:
Shai,
1. Every single airline is trying to bring back their flying customers - but only a select few will do it well.
2. So, I would like to help to turn Virgin Atlantic (VA) into a “Michelin” of the Airline Industry.
3. You may ask: why Michelins? Well, if you look at Michelin’s commercials, you will seldom see an emphasis on the quality of their rubber, or their steel-belts. All you see instead is a bunch of delighted parents that safely place their children into an SUV - which, of course, rides on the Michelin tires...
4. And since the most successful brands focus on CUSTOMER’S END VALUE – VA has a unique opportunity to articulate its safety in a genuinely authentic and persuasive manner.
5. There are 2 far-reaching recommendations I would like to make. The objective is to help VA create a sticky message - linked to specific initiatives reflected in the following tag line: “Virgin Atlantic - The Michelins Of The Airline Industry - and not just because of our tires…”
On Oct 5th, 2020, I learned from the company’s news release that Virgin Atlantic introduces an on-site pre-flight Covid-19 testing trial for the crew. My response was immediate:
“Shai, I can’t even imagine how difficult it must be to face the post Chapter 15 bankruptcy challenges. So, my sincerest congratulations on becoming the first UK airline to introduce pre-flight Covid-19 testing for your cabin crew and pilots flying out of Heathrow Airport!
This is exactly the kind of POSITIVE NARRATIVE that Virgin Atlantic needs! And I would love to help you to do more, much more – to reinforce the brand.
As previously mentioned, turning “Virgin Atlantic into a Michelin of the airline industry” requires a consistent effort. So, I would like to recommend both: short-term AND long-term specific initiatives. I look forward to hearing from you. Are you available for a quick call next week? Thank you.
As in all previous Reinventing cases, the lack of response from the VA convinced me to write about it - and to post all the details on LinkedIn. Let us begin…
The Present
Few will disagree with the alarming facts about the decimation of the airline industry – or as The Guardian recently called it: “The Meltdown”, and it said:
“Coronavirus has hit few sectors harder than air travel, wiping out tens of thousands of jobs and uncountable billions in revenue. By mid-April, about 14,400 passenger planes around the world – 65% of the global fleet – had been placed into storage. Companies that have been brought to the brink, or in some cases collapsed entirely, include Virgin Australia and Virgin Atlantic, Flybe in the UK, South African Airways, LATAM and Avianca in South America, Compass and Trans States in the US”
Such numbers speak for themselves. The black hole is so big that no amount of tried and tested cost-cutting measures based on scheduling optimizations, route logistics, or even fuel saving efficiencies - is going to help the industry to dig itself out the hole.
The International Air Transport Association (IATA) recently warned that: “The airline industry will burn through $77 billion in cash during the second half of 2020 (almost $13 billion/month or $300,000 per minute), despite the restart of operations. The slow recovery in air travel will see the airline industry continuing to burn through cash at an average rate of $5 to $6 billion per month in 2021. And while “In the past, airlines have only been stung by one or the other of these factors. During Sars, travel was unsafe, but the global economy didn’t flatline. During the 2008 financial crash, money was tight, but flying was not a health risk. In the 110 years since the dawn of commercial flight, these blows had never been dealt in tandem, until this year”
True, the COMBINED effect of the worst economic recession since World War II with the worst pandemic of the last century – is unprecedented, to say the least. And a quick glance at the stock-chart of any airline reflects the harsh reality:
The Future
There is little doubt in my mind that even under the most optimistic scenario, the airline industry recovery will still be described by the following “Less” attributes:
· Less: traffic, flights, passengers, and… fewer revenues
So, it’s time to start paying attention to both: Strategic Leadership AND Operational Excellence. And it’s time to recognize the power of Emotions AND Logic - that are needed to bring the anxious & confused customers back…
I am convinced that the structured finance behind the recovery will be a bit more complicated than subtracting from:
· The Revenue per Available Seat Mile (RASM) – a unit of measurement commonly used by airlines to describe its total operating revenue per seat (empty or full) flown per mile. It factors in not just ticket revenues but also includes fees for baggage, seat selection, food and drink, Wi-Fi, etc.
· The Cost per Available Seat Mile (CASM) – a unit cost commonly used by airlines to measure efficiency and performance that represents the average cost to fly an aircraft seat (empty or full) flown per mile
So, it’s time for the airline industry to use both: Expert & Non-Expert advice from outside the industry – just as I described in “REINVENTING XYZ”. My LinkedIn post provides the blueprint and the rationale behind the universal reinvention process. And it is done concisely and pragmatically…
It is exactly why my VA strategy was to recommend to focus on Health, Safety, and Climate Change – to reinforce VA’s brand…
Addressing Pandemic Anxieties
The aforementioned COVID-19 VA crew tests - are a great first step. As more rapid tests become available, such a strategy should be further extended to test all the passengers - before boarding.
Besides, VA can add the portable UVC disinfection capabilities - right at the gate! Would it be so difficult to place a small UV disinfection device at the counter, capable to sanitize the phones, wallets, car keys, or the face masks - all in 20 seconds?
Better yet, is it so difficult to have the Roombas and/or other robots with the UV attachments to roam the airplane cabin? Disinfecting the air is a big issue for all the ticket holders and UV robots can play their part. I wrote about it in my post: “To Do What It Takes”
Addressing Flight Safety Anxieties
Just before COVID-19, all the stakeholders of the entire airline industry were sharply focused on… Boeing. In my post: Reinventing Boeing I wrote at length about the company’s predicament…
And I said: “I have no doubts that Boeing can fix the technical problems and deliver a truly superb aircraft to customers around the globe. However, it became painfully clear to all, that the entire world is watching Boeing like a hawk and that much more is needed than a software fix - to satisfy the public scrutiny and the regulators” …
I also said: “All around the world, the Transportation Safety Boards (TSBs) investigate aviation accidents and analyze the Black Box with great scrutiny. However, quite frequently, the black box cannot be found at all – as it may be resting at the bottom of the ocean. Or, it is so much damaged that it’s rendered completely useless to draw any meaningful conclusions about the cause for the accident.
But what if the black box data was constantly transmitted via satellites and relayed back to Earth - to the flight control centres on the ground? Flight data would have been readily available ALL THE TIME. And it would help not only in case of accidents but also in an ongoing diagnostics and preventive maintenance of the airplanes - 24/7!”
But this was back in June, and I never heard back from Boeing. Not a peep… And I even asked: “If Elon Musk can use his satellites to offer Netflix’ binge-watching - what exactly prevents Boeing from offering data streaming from the airplanes? After all, the bandwidth of such data transfers is less demanding than streaming HBO videos”…
So, if waiting for Boeing to “digitize” the black box is like waiting for Godot – what is VA to do? Well, in a single word: PLENTY. And a good first step would be to stream the video of the cabin!
Technically speaking, VA’s duplicating the content of the black box data might be too challenging and too expensive. Streaming the cabin’s video is not. And such images could also offer a whole slew of real-time information about the flight’s safety and pilots’ responses to the unexpected. It can be even done by utilizing VA’s own Virgin Orbit, or Elon Musk’s STARLINK services…
Addressing Climate Change Anxieties
Prior to the pandemic, the airline industry was under intense pressure to reduce its CO2 emissions. This is not a big surprise since airlines account for 12% of all carbon dioxide emissions in transportation.
However, increasing fuel efficiencies and utilizing biofuels is not the answer to meet the IATA’s Carbon Offsetting and Reduction Scheme. Especially, since the air traffic increased over the years at twice the rate of realizing fuel efficiencies…
Unfortunately, container-size Lithium-ion batteries are not a viable aviation solution, yet. Such are simply too heavy for the airplanes. However, liquid-hydrogen air transportation is promising. It’s much lighter than utility-scale batteries.
Regrettably, the present development of advanced hydrogen fuel-cells is still primarily focused on hydrogen trucks, buses, and trains. You can find more details on above in my post: Reinventing Bombardier
In addition, one quick look at the global CO2 emissions indicates that not all the continents demonstrate the same CO2 emission trends. While North America, Europe, and Australia are reducing the overall emissions, countries in Asia do not! And yet, most of the emissions’ criticism is oriented squarely toward the ones making a difference!
In China, India, Russia, and Iran - climate change is not a part of the airline industry’s conversation. Once more, the biggest polluters are quick to play the blame-game and say that it’s “one more instance of western nations promoting environmental standards that they have violated for decades, and that such standards will curb the economic development of Asian countries”
Well, IMHO, China’s excuses for not reducing the CO2 are as pathetic as saying to the US that since it tolerated slavery for such a long time - the push for democracy in China can wait, too… You can find more on about in my post: Why COP25 Failed And How To Fix It
In Summary
My Reinvention stories of discarded advice deserve to be told. Especially, since 97% of all CEOs & BODs are not receptive to outside advice! Airlines are no different. So, it’s time to start paying attention to outside advice as there is much more that can be done besides waiting for the bailouts…
And my parting message to all the airline executives is this: knowing about the industry’s predicament is one thing, doing something about it is another. Warren Buffet said it the best in his Noah’s Rule years ago: “Predicting rain doesn't count; building arks… does!”
There are not too many people on this planet who understand the Power of Branding better than Richard Branson. Yet I’m not sure that other executives in charge of Virgin’s flagship business units equally UNDERSTAND the Factor Endowment of the entire Virgin Brand…
It always surprises me when I don’t hear back from various CEOs after presenting to them some of the most ground-breaking recommendations on how to turn things around. And Virgin Atlantic is exactly one such case...
After all, VirginAtlantic just filed for bankruptcy protection, so why wouldn’t its CEO listen to good advice on how not to turn the dreams of wealth into nightmares of poverty? Especially, since my counsel is based on the quintessential Aristotle’s wisdom: “The Whole Is Greater Than The Sum Of Its Parts”
The synergy I described between Virgin Atlantic & Virgin Galactic is just the tip of the iceberg. Overcoming the inherent limitations of outdated Black Boxes of the aviation industry is up for grabs… And Virgin, especially, can forge a powerful synergy here - that will help both its brands…
Still not convinced? How about adding Virgin Media Business (VMB) unit into the fray? Just look at how much AWS cloud services at amazon are growing each year. So why couldn’t VMB offer similar cloud services to handle the cockpit video?
As with negotiation, I never recommend doing so over a single issue. Adding additional dimensions to your negotiation strategy offers a much greater solution space. And it’s not much different in branding. You end up with a great synergy between the brands and a much stronger brand-enhancement from multiple directions…
I am in the business of joining Advisory Boards/BODs of the most innovative companies all around the world. And as one of the ultimate BusinessAI? veterans on the planet w/ over 30-yr hands-on AI expertise, I also bring supreme business savvy to separate the wheat from the chaff.
Moreover, I am at that stage in my life where I don’t care about BOD politics and water-cooler gossips. Nor do I offer fake flatteries to CEOs. All I care about is how to solve problems & deliver results…