Post-pandemic business travel recovery is tracking ahead of
expectations for Virgin Atlantic with some industries now fully recovered, but demand
from leisure passengers for the airline’s premium cabins is leading to “tight” availability
for late-booking corporates.
The speed of recovery and growth
in the airline’s premium leisure business has led to a situation in which some
corporates have struggled to book their desired fares and prompted the airline
to start protecting some inventory on key corporates routes.
“We’ve been pleasantly
surprised by the pace of recovery and load factors are very strong,” Tom
Maynard, the airline’s head of
corporate sales UK and Europe, told BTN Europe.
“When you get into that
traditional corporate booking window we’re seeing that availability [in premium
cabins] is quite tight. Corporates are getting there and finding they haven’t got
their lower inventory business class,” said Maynard. “They’re almost being priced
out.”
He continued: “So what we’ve
done is to put measures in place on some of those key corporate routes – JFK,
Los Angeles, Atlanta – to protect some of that inventory for closer-in
departures for those corporates.”
The airline’s corporate business from UK points of sale is
currently sitting at around 63 per cent recovered year-to-date, compared with 2019, and is on track
to surpass the 70 per cent figure it had predicted for 2022 last autumn.
“The pace of recovery has been really strong and that’s on
the back of a relatively weak January and February because of Omicron,” said
Maynard. “If
you look at the last six weeks on a rolling average, we're probably sitting at
about high eighties or low nineties (per cent) in terms of that corporate
recovery.”
Maynard said the airline “could
be pushing 80 per cent recovery” by the year’s end but added: “I don't think
we're going to get to a 100 per cent recovery [this year]. I don't think that's
realistic, but we may be ahead of where our forecast was, and we certainly are
right now.”
He
stressed that the key business travel months of September and October will have
a significant influence on its 2022 performance and cautioned that current
momentum might not continue. “I’m trying to temper expectations because we
still don't know realistically what the pent-up demand is like and if we are still
burning through some of that,” said Maynard.
Recovery
and rising fares
In terms of industry
variations, business from the media and entertainment sector is “probably 100
per cent covered” while government and defence is at 70 to 75 per cent of pre-pandemic
levels. Virgin’s “key drivers” – financial, professional and business services
– are now back to more than half of historic volumes while the tech sector has
proved one of the last, but fastest, to recover. “Tech was probably only 20 per
cent recovered in March but it’s now at 70 per cent,” said Maynard.
Another sign of recovery is
the rebalancing of the airline’s leisure and corporate traffic. Historically, fares
booked by TMCs accounted for 40 per cent of Virgin’s business. That figure
stood at 15 per cent in September 2021 and the airline had not expected it to
close the gap much this spring. “We’re now seeing that [hit] around 30 per cent
so that’s probably double what our expectation was,” said Maynard.
The upshot of carefully
managed capacity – Virgin is now operating at 90 per cent of pre-Covid levels –
combined with pent-up demand, rising fuel costs and inflation has led to what Maynard
calls “the perfect storm”.
“Fares are high at the moment.
There’s a lot of pressure on ticket prices,” he said. “Average coupon values
are higher than we probably anticipated which is good from a business
perspective but we’re also mindful from a passenger perspective that we don’t
want to stifle demand. It’s a very delicate balance right now.”
Full RFPs from corporate
customers remain few and far between with around 70 per cent of organisations
instead opting to extend existing deals – normally a discount off published fares
– for another 12 months.
“The challenge is [for those
conducting RFPs] what data are you using? We’ve only realistically had three or
four months of true flying. It’s very limited data to run a full RFP on, so our
view is still very much ‘extend and amend’,” Maynard explained.
New sustainability scheme
The airline, which is
targeting a 15 per cent reduction in carbon emissions by 2026, is on the brink
of launching a programme for corporate customers that will include emissions
reporting and SAF purchase opportunities.
“There are a lot of different
methodologies out there, and a lot of people are still using a fairly antiquated
DEFRA model. We’ve built our own [emissions] calculator which will look at the
aircraft, the engines, the fuel burn, load factors, how much cargo was onboard
etc, to get a really accurate picture for our corporate customers. And then they
can purchase SAF to help with their Scope 3 [emissions] reporting,” said
Maynard.
The airline signed its first sustainable
aviation fuel supply deal in February and is expecting SAF to account for at
least ten per cent of its fuel consumption by 2030. It is also committed to
becoming net zero by 2050.
Virgin Atlantic recently retired the last
of its A330-200s and with new A330 NEOs arriving this year will give it “the
youngest fleet, under seven years [on average], in the industry,” said Maynard.
“We are a greener carrier than a lot of our competitors… and we need to play on
that because they are significant investments.”