Virgin Atlantic Confirms Closure of Little Red Operation

Virgin Atlantic will end the Little Red flights, operated on its behalf by Aer Lingus, during summer 2015. The London Heathrow – Manchester route will close at the end of March 2015 and the links from the UK capital to Aberdeen and Edinburgh at the end of September 2015.

UK carrier Virgin Atlantic Airways has confirmed it will close the three domestic UK routes currently operated under the Little Red brand between London’s Heathrow Airport and Aberdeen, Edinburgh and Manchester during 2015, just two years after launching the services after securing the lucrative Heathrow Airport remedy slots awarded by the European Commission as part of the takeover of bmi British Midland International by British Airways’ parent International Consolidated Airlines Group (IAG).

The decision on the airline’s short haul carrier follows a major review of Virgin Atlantic’s wider network. Last month the airline announced a network update delivering five new daily transatlantic flights and an ambition to grow to record levels of sustained profitability by 2018. This will be supported by a major programme of work that will see £300 million invested into the customer experience.

The airline says the operation was launched “as an attempt to reintroduce consumer choice on key domestic services” after British Airways’ takeover of bmi gifted them a monopoly on these routes but unfortunately it had “not been able to make a positive contribution to Virgin Atlantic’s network”.  Although initial passenger loads were small, bookings have grown steadily for the service in the first part of 2014 and had enjoyed an excellent on-time performance at Heathrow Airport, flying well over a million passengers between London, Scotland and Manchester.

However, according to Virgin Atlantic, the demand has been predominantly in direct – point-to-point – customers rather than anticipated connecting traffic.  The airline will now have to look at how it feeds its long-haul traffic in its home market, although its new partnership with shareholder Delta will certainly help boost the feed on the US side of its transatlantic network.

High levels of connections onto Virgin Atlantic’s long haul network have always been important to the success of the business and our analysis of MIDT data suggests that as little as five per cent of passengers on the two routes from Scotland were connecting in London to Virgin Atlantic's wider network.  The figure is considerably higher for the Manchester route and highlights why the airline utilised its own legacy slots to serve this market.

“Little Red came about through an enduring passion at Virgin Atlantic to make a difference for our customers. We really wanted it to be a success and everyone involved worked extremely hard and gave it their best efforts,” said Craig Kreeger, chief executive officer, Virgin Atlantic Airways.

“It was always a huge challenge on behalf of the consumer, as the totally inadequate number of slots made available by the European Commission did not deliver close to BA’s network position, even when supplemented by our own slots to fly between Heathrow and Manchester,” he added.

According to the executive, the time lag between BA’s takeover of bmi and Virgin Atlantic entering the market also meant Little Red initially faced an uphill battle to win recognition and convert customers to its services. “This challenged environment meant Little Red ultimately did not deliver the results we had hoped,” he said.

The president and founder of Virgin Atlantic, Sir Richard Branson has once again used the closure announcement of Little Red to highlight what he believes is unfair treatment by competition authorities. "When the competition authorities allowed British Airways to take over British Midland and all of its slots, we feared there was little we could do to challenge BA’s huge domestic and European network built through decades of dominance,” he said.

“To remedy this, we were offered a meagre package of slots on a short-term basis and decided to lease a couple of planes and give it our best shot. The odds were stacked against us and sadly we just couldn’t attract enough corporate business on these routes,” he added.

Virgin Atlantic will end the Little Red flights, operated on its behalf by Aer Lingus, during summer 2015. The London Heathrow – Manchester route will close at the end of March 2015 and the links from the UK capital to Aberdeen and Edinburgh at the end of September 2015.  The remedy slots will then return to IAG as under the competition authority rules Virgin Atlantic was required to use them for a minimum period of three years to take ownership.

In our analysis, below, we look at O&D passenger demand on the three UK domestic routes over the last 12 months. It is clear that Little Red has strengthened its position in the market after a slow start and was becoming a strong competitor to British Airways (BA) in the point-to-point market. However, the BA figures are significantly inflated when you also include the transfer traffic connecting in London to its wider international network from Heathrow Airport.

Our data shows Little Red had secured a 38.4 per cent share on the point-to-point bi-directional traffic between London Heathrow and Aberdeen during the 12 month period (September 2013 – August 2014) versus 61.6 per cent for BA; 41.6 per cent on the London Heathrow – Edinburgh route, versus 58.3 per cent for BA and 41.5 per cent on the London Heathrow – Manchester route, versus 58.1 per cent for BA. 

Interestingly, the data shows that in August 2014 Little Red actually carried more point-to-point passengers than BA for the first time on one of the three routes handling 14,256 passengers between London and Manchester, versus 13,635 for BA.

Data provided by Sabre