Yahoo Finance Virgin Atlantic eyes Gatwick return as it gives up on Heathrow third runway
Sir Richard Branson’s Virgin Atlantic is examining a return to Gatwick and flights from regional airports such as Bristol after giving up hope of a third runway at Heathrow before the end of the decade.
Chief executive Shai Weiss said the airline was evaluating more flights from the carrier’s secondary hub in Manchester and an expansion of the Virgin Holidays arm as part of its plans for growth between 2025 and 2030.
The blueprint, not yet made public but known internally as VX30, will aim to grow revenues by 20pc beyond the £3.5bn expected this year, Mr Weiss said.
He said: “I think we’ve got to rule out a third runway, which leaves either the acquisition of slots at Heathrow or flights from Gatwick and secondary cities in the UK.”
Growth at Virgin’s main Heathrow base remains the preferred option because of the high margins and better connectivity between flights there, but the new growth plan will assume scope for that will be limited.
Heathrow, which operates almost at full capacity, put plans for a third runway on hold during Covid when the project was already facing renewed political and legal hurdles, and has yet to formally revive them.
Willie Walsh, the former British Airways boss who now leads airline industry trade group Iata, said last week that a new runway may never be built at Europe’s busiest hub.
Still, Virgin will carry on seeking out available operating slots at Heathrow on an ad hoc basis, Mr Weiss said. It has managed to acquire five daily pairs in the past two years, including slots purchased from KLM and others seized from Russia’s Aeroflot and reallocated.
He said: “We’ve picked up slots and we’ve purchased slots, but it’s a limited pool and very expensive. And it’s unpredictable because you have to rely on the slots becoming available.”
A handful of Virgin’s slots are currently unused after it suspended services to Israel following the Hamas attacks, but they will be pressed into service when Tel Aviv flights resume in September.
Mr Weiss said he would continue pushing Heathrow to agree to plans that would see Virgin get its own dedicated terminal at Heathrow.
The facility would match British Airways’ operation at the airport’s Terminal 5 and would be shared with Delta and Virgin’s partners in the SkyTeam global alliance.
As it looks beyond Heathrow, Virgin could return to Gatwick.
The airline operated there until 2020, when it quit the airport during Covid. Stewart Wingate, Gatwick’s chief executive, told the Telegraph earlier this month he would welcome Virgin back “at the earliest opportunity”.
Virgin continues to own operating slots at Gatwick under a so-called babysitting agreement with EasyJet, which allows the positions to be reclaimed.
Mr Weiss said that while a return was a long-term possibility, it would not be undertaken lightly and the airport was no closer to relaunching there.
The Virgin chief spoke on a flight to Las Vegas, where the company is marking its 40th anniversary with the launch of services from Manchester to the gambling and entertainment mecca.
Mr Weiss said Manchester can expect to get one or two new destinations a year under the airline’s expansion plan, while flights may also be put on at Bristol. Virgin’s only other UK base is in Edinburgh, but there is a chance that flights from Glasgow and Belfast, which have remained grounded since the pandemic, could also be restored.
To put on the extra flights, Virgin is looking at leasing extra aircraft to expand its fleet beyond the 45 planes the company will have once the last A350 jet from its existing order book arrives.
Mr Weiss stressed that all elements of the strategy must deliver profitable growth and do nothing to undermine the progress of its VelocityX plan, which has sought to stabilise the airline after it came close to collapse during Covid.
He said: “We’ve been through the valley of death and we’ve come out the other side.”
Virgin is on course to post record revenue this year and return to a positive operating profit this year, Mr Weiss said. The airline will not make a net profit as a result of the cost of servicing £1.5bn of debts run up during Covid.
The company could look to reduce this burden by raising fresh equity to pay down debt. However, this would dilute the holdings of Sir Richard and minority owner Delta Air Lines, which Mr Weiss said was an unattractive option.
Mr Weiss said: “Our shareholders kind of like where we are. Our job in management is to generate cash, to service the debt and strengthen the balance sheet.”
An expansion of the Virgin Atlantic Holidays arm, which generates 20pc of revenue, is likely to feature in VX30, since the business also helps fill Virgin planes.
Other efforts will focus on extracting more value from collaboration with Virgin Flying Club and the Virgin Red rewards club.
