Virgin America tops, according to Conde Nast

Courtesy Virgin America

Courtesy Virgin America

Virgin America is the best airlines in the US according to a readers survey by Conde Nast. It is a credible list.

The top five airlines are as follows:

1. Virgin America, for its service and roomy cabins that include such features as touch-screen menus ordering, seat-to-seat messaging, no shortage of power outlets, Netflix streaming and mood lighting.

2. JetBlue Airways, for its ten-inch seatback screens, entertainment streaming options, free internet, unlimited blue chips and snacks.

3. Hawaiian Airlines, for its lie-flat seating in the premium cabin, welcome mai tais and guava cookies, and reputation for punctuality.

4. Alaska Airways, for its friendly staff, comfortable seats, reliability and guarantee that checked luggage will arrive no later than 20 minutes after touchdown.

5. Southwest Airlines, for its fun staff, affordable fare, two free checked bags allowance and any change of ticket without penalty.

Worthy of note is the ranking in the top five positions of both Alaska Airlines and Virgin America, which have since merged but continue to operate under their different names for the time being. Their merged identity is set to be a major aviation powerhouse in the US,

Also worthy of note is the absence of the big three US airlines: American Airlines, United Airlines and Delta Air Lines. Size is not a plus in this case, it seems.

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Confirmed: Alaska Airlines acquires Virgin America

Courtesy Alaska Airlines

Courtesy Alaska Airlines

IT’s confirmed, subject to final approval by the relevant parties, Alaska Airlines will acquire Virgin America.

Alaska has that personal touch that many airlines lack. As a registered customer of the airline, it is nice to receive this message :

“As one of our most valued customers, we wanted to be the first to share with you some exciting news that Alaska Airlines is acquiring Virgin America, combining two leading airlines both known for low fares and award-winning customer service. With complimentary West Coast-based networks, operational excellence and a strong commitment to innovation, the joining of Virgin America and Alaska will expand our existing California footprint and grow our transcontinental network, giving you more travel options with 1,200 daily departures nationwide.

We’ll keep you updated on the timing and plan for integrating our two airlines.”

So, congratulations, Alaska Airlines!

Both airlines will continue to fly their individual identity until the single operating certificate is issued when the combined entity will be known as Alaska Airlines.

Alaska Airlines pips JetBlue for Virgin America deal

alaska airlinesWHILE it was initially speculated that JetBlue would win the bid for Virgin America, now it looks like it is Alaska Airlines that will emerge the victor. The Seattle-hub airline is expected to pay US$2 billion for the deal.

Merging with Virgin will enlarge Alaska’s base on the west coast, more specifically its share of traffic out of San Francisco from 4 per cent to 15 per cent and Los Angeles from 5 per cent to 11 per cent. Alaska, currently ranked 6th by traffic in the US behind JetBlue, will now be bigger than its rival.

A point in favour of Alaska, which also owns Horizon Air, is that it has fewer overlapping schedules with Virgin.

As American aviation continues to spawn mega mergers that shrink the number of competing carriers, the authorities will have to grapple with concerns that this may lead to higher airfares. However, there is the glimmer of hope that both Virgin and Alaska as one airline will continue to offer lower fares with fewer add-ons competing with the other airlines.

Which Asian airlines might be interested to buy into Virgin America?

Photo courtesy Virgin America

Photo courtesy Virgin America

UP for sale, Virgin America has some suitors lining up. It has received takeover bids from JetBlue Airways Corp and Alaska Air Group Inc. In this era of the mega carriers (consider the mergers of United Airlines and Continental Airlines, Delta Air Lines and Northwest Airlines, and American Airlines and USAir), a tie-up with another carrier strengthen Virgin’s competitive ability. And while it is almost certain that the merger would be with another American carrier, with analysts placing bets on JetBlue as the best fit, apparently some unidentified Asian carriers have also expressed interest. Still, be that as a remote possibility, one cannot help but be curious and speculate who the likely candidates might be.

Two big names come to mind immediately because of their successes, networks and financial capability, namely Cathay Pacific Airways and Singapore Airlines. Both airlines are keen on expanding their US market. Cathay flies to Boston, Chicago, Los Angeles, New York and San Francisco while Singapore Airlines (SIA) operates to Houston, Los Angeles, New York and San Francisco. Both airlines have codeshare access to several other destinations. Cathay’s codeshare partners include Alaska Airlines and American Airlines while SIA already codeshares with Virgin and with JetBlue.

So it looks like SIA more than Cathay would be favoured on relationships alone. Since foreign ownership rules governing US airlines require the bid to be submitted jointly with a US partner. It would be convenient for SIA to join hands with JetBlue. Of course, Cathay may partner Alaska Airways, but historically Cathay is not quite interested in equity participation. Although it has a 20.3% stake in Air China and 49% in Air China Cargo, that could be a matter of expedience to secure its market in the growing China mainland market.

SIA on the other hand, limited by a hinterland market, tried in its early years to grow through acquisitions. In 1999, it bought 49% of Virgin Atlantic and subsequently 25% of Air New Zealand. Although both buys subsequently proved to be lemons, resulting in heavy losses, the misstep might be less strategic than circumstantial. Unfortunately that has hurt SIA deeply more psychologically than financially as the airline became more cautious about such moves. In subsequent years it failed in its seemingly reluctant bid for a stake in China Eastern Airlines, and the SIA Group was plagued by the poor decisions of its budget subsidiary Tigerair in joint ventures in Indonesia and the Philippines. In Oct 2012 SIA bought a 10% stake in Virgin Australia, joining tow other foreign partners namely Air New Zealand and Etihad Airways. In much the same way that Cathay needed to secure its market in China partnering with Air China, SIA needed to secure its Australian market against the competition by Qantas. Six months after, SIA increased its stake to 19.9%.

But is SIA even interested in a stake in Virgin when its codeshare partnership with JetBlue already places it in an advantageous position to benefit from a JetBlue takeover of Virgin? Would a bid jointly with an Asian partner jeopardise JetBlue’s chances if the powers that be preferred an all-American merger a la the big three of United, Delta and American?

Besides Cathay and SIA, one should not ignore the voracious appetite of the China carriers in the national trend to acquire foreign assets. And why must it be premised on full-service carriers that are already serving destinations in the US? What about a budget carrier with dreams of new frontiers? Maverick AirAsia chief Tony Fernandes who models himself after Virgin guru Richard Branson and who had been where others were hesitant, even afraid, to go may yet surprise with an expression of interest even if it is no more than just that. He is one of the few airline chiefs who, like Ryanair’s Michael O’Leary and Qantas’ Alan Joyce, understood what an opportune good dose of publicity could do.

All this, of course, is speculative. Asian carriers are likely to be less concerned this time than when the mergers of the American big three took place. Together with Southwest Airlines, the big three control 80% of the American market. Virgin and its alleged interested parties JetBlue and Alaska are all largely domestic carriers. Even if Southwest throws in a bid (but for its size that may not pass the antitrust law as easily), it is still the same scenario. SIA’s connections with JetBlue and Virgin will continue to stand it in good stead, but if it’s Alaska that carries the day, then it is Cathay that stands to benefit from the new, extended connection. Or does it really matter when there are already subset agreements across partnership lines that allow you to fly an airline of one alliance and connect on another in a rival group? That’s how complex today’s aviation has become.

Singapore Airlines wins Conde Nast best airline award: An old formula that still works

Courtesy Singapore Airlines

Courtesy Singapore Airlines

Conde Nast readers have picked Singapore Airliens (SIA) as their 2014 favorite airline, loved for its good food and comforting seating but above all, its service and customer attention. “The flight attendants are the most courteous of any airline,” said one reader. “This airline definitely treats you like a part of its family,” said another.

SIA has yet again demonstrated how an old formula still works, the personal touch and smile that never failed to win hearts. Many airlines distinguish themselves by the excellent service they provide in the front cabin, but the SIA crew are not far less friendly at the back as well even as they understandably only address premium customers by name. Of course, First and Business Class travellers are feted with champagne and treated to flat beds. Offered exclusively on its A380 aircraft are a pair of fully flat recliners that can be transformed into a double bed. The airline even boasts a “book the cook” program whereby premium customers can pre-order meals designed by top chefs.

One should always be circumspect about “best” survey results and look closely what are being measured. There is a huge bias for the grand offerings in the upper class. Nothing wrong with that since that is where the money is, all the more so when the market for Economy is more inclined to be price sensitive. Fortunately, if providing excellent customer service is in an airline’s DNA, its essence is likely to permeate from the nose of a plane to its tail, though the degree of attention, to be expected, differs.

Conde Nast readers voted Emirates Airlines as the next best after SIA for similar reasons. One reader said: “They truly care about their customers and always try to exceed expectations.” And another: “Amazing service… staff are extremely polite.”

Of course, Emirates also impressed with sought after amenities, excellent food and wines, and luxurious pre-boarding lounges for premium passengers, not to mention the shower on its A380 plane.

Third in the Conde Nast is Virgin America. This is an airline truly linked to the Richard Branson lineage. It is what you may call a “hip” airline that impresses with innovative ideas and sophisticated in-flight features such as touch-screen meal orders and seat-to-seat messaging. It is modern, offering a unique experience without losing customer focus. As one customer said, “You feel like you’re going to a club when you step on the plane. It’s modern, attentive, and their social media is amazing.” Another reader summed up, “Virgin America has a high coolness factor.”

Singapore Airlines: Life with/without Virgin

siaWHAT is life for Singapore Airlines (SIA) with and without the Virgin brand? The end of last year saw the Singapore carrier breaking and joining ranks with the Virgin brand. (See Singapore Airlines’ penchant for the Virgin brand, Dec 17, 2012).

SIA acquired a 49-per-cent stake in Virgin Atlantic in 1999 at a time when it was pursuing trans-Atlantic rights between London Heathrow and New York. That investment has proven to be lacklustre, and for many years after SIA made it known it would divest the stake. Delta Air Lines came knocking and the deal was quickly sealed, but at a loss to SIA which received £224m (US$360m) for the £600m (US$965m) that it had paid. (See Finally, SIA lets Virgin go, Dec 12, 2012). It was the price for getting a heavy load off its chest.

But there is more to the affinity between SIA and the Virgin brand. In the same year, it entered into marketing alliances with Virgin Australia – and later took up a 10-per-cent stake in the carrier – and Virgin America. Through Virgin, SIA will have greater access to the Australian and North American continents, and customers of the partners will enjoy seamless transfers and common lounger facilities. (See Singapore Airlines ramps up Virgin cooperation, Nov 23, 2012).virgin

The question is: How significant are these developments in the SIA global strategy?

Both SIA and Virgin are strong brands, so the alliance should make a formidable competitive force. Yet it may not work out as aggressively as may be expected. As major airlines move towards mega alliances and mergers, such as the Qantas-Emirates partnership, it might seem that SIA and Virgin are thrown by circumstances into the same ring. Both brand names have been very successful in their own rights, and SIA has had a speckled history of lacklustre investments in other airlines – Virgin Atlantic itself and Air New Zealand, both loss-making.

Australia and the US are important markets for SIA, and connecting with the Virgin brand makes sense. But one wonders if connecting to secondary airports would significantly strengthen SIA’s positioning. SIA is very much a trunk route operator, and the two Virgins are by comparison for now more local than international. The US market is dominated by American carriers that are both domestic and international operators.

Still, it looks like an impressive strategy to tap into the hearts of both continents. Marketing alliances are easy to come by; making them work meaningfully is another story.

 

Singapore Airlines’ penchant for the Virgin brand

Courtesy Singapore Airlines

Courtesy Singapore Airlines

THERE appears to be a natural relationship between Singapore Airlines (SIA) and the Virgin brand. Or, you may say, the Singapore flag carrier seems to have a penchant for the Virgin brand.

While SIA has finally got rid of a disappointing investment in Virgin Atlantic, selling its 49 per cent stake which it acquired in 1999 to Delta Airlines (see Finally, SIA lets Virgin go, Dec 12, 2012), it has now entered into a code-share arrangement with Virgin America. By this, SIA customers will enjoy seamless transfer to Virgin, from its West Coast gateway points of San Francisco and Los Angeles to reach more cities in the United States, namely Chicago, Fort Lauderdale, Las Vegas, Palm Springs, Philadelphia, Portland, San Diego, Seattle and Washington D.C.

SIA currently operates 45 weekly flights to five points in the US, including New York JFK, Newark and Houston. However, the statement it issued did not mention transfers from these points.250px-Virgin_America_Logo.svg

Virgin Senior Vice President for Planning and Sales John MacLeod said: “The partnership with one of the world’s leading airlines is a testament to the quality of our product.”

In many ways, SIA and Virgin are similar. Both are respectable brand names that are facing tough competition from rivals, particularly mega-alliances such as British Airways/American Airlines and Qantas/Emirates. They are under pressure to seek suitable tie-ups lest they be disadvantaged by the lack of an extended network beyond their individual operations.

What SIA does with Virgin America replicates what it is doing in Australia in its alliance with Virgin Australia in which it recently acquired a 10 per cent stake. (See Singapore Airlines ramps up Virgin cooperation, Nov 23, 2012). The partnership gives SIA access to 32 Australian cities via Virgin connections.