Turbulent times for Branson's racing mate
Never one to duck a challenge, the man at the throttle tells Sarah Arnott how he plans to keep Virgin Atlantic above the clouds
Thursday 30 June 2011
Twenty-five years ago this week, Steve Ridgway was battling his way across the North Atlantic as part of the crew of the Virgin Atlantic Challenger as it attempted to break the record for the crossing.
After one false start – Challenger I capsized just off Cornwall – Challenger II shaved two hours off the fastest transatlantic time. The race also left Mr Ridgway, the boat's designer and "throttleman", fast friends with Sir Richard Branson. And soon after the trip he went to work at Sir Richard's newly established airline, Virgin Atlantic. "We became great friends – bonded in sea-sickness," says Mr Ridgway, who became the chief executive in 2001.
In the notoriously margin-lite world of commercial aviation, Virgin Atlantic was a mould-breaking idea, a rare independent in an industry dominated by national flag carriers. "There simply isn't another Virgin Atlantic anywhere else in the world," Mr Ridgway says.
Part of the explanation is the UK market. Thanks to Heathrow's hub status, it is large enough to support more than one big native player. But another reason for its success is that Virgin Atlantic prided itself on doing things differently, and some of its new ideas – such as the concept of Premium Economy – were quickly taken up by rivals. "Putting together an airline where customer service, marketing and innovation are at the forefront was a real revolution," Mr Ridgway says. "Now there are a lot of others doing it too, but when we started it was revolutionary."
Mr Ridgway has played a key role in creating the distinctive Virgin Atlantic ethos, helped by the "formative experience" of the Challenger ocean crossing. "Putting my life on the line and challenging myself like that was really something," he says. "It made me more determined, I think, and kept me committed to being adventurous and doing things differently."
As the airline navigates another patch of industrial turbulence, Mr Ridgway needs all the determination he can muster. The most immediate problem is Virgin Atlantic's pilots. Fresh from the airline's 27th birthday party at the House of Commons last week, the boss is effusive about the role of the company's staff in its success. But Virgin Atlantic is facing its first industrial action after pilots voted overwhelmingly against the management's offer of a 4 per cent pay rise.
So far, no strike dates have been announced and negotiations re-started this week in an attempt to find a solution. Mr Ridgway remains adamant that the airline will get through what he describes, quoting Harold Macmillan, as "a little local difficulty".
Mr Ridgway acknowledges the pilots' claim that salaries need to increase after a two-year pay freeze. But he disputes that the acceptance of a below-inflation rise is tantamount to a pay cut, emphasising that the offer is around twice the industrial average and that the details of the offer need to be communicated to the pilots themselves, not only their union representatives.
"The offer is not asking the pilots to agree to a pay cut," he says. "It is about where we are in the economic cycle. It is about the reality of what is going on in the business and in the market place and what is affordable."
The dispute is "unnecessary, disappointing, evidence of a model of industrial relations that is antiquated and out of date", according to Mr Ridgway. It also comes at a difficult time for an increasingly isolated company facing existential questions in the face of mass consolidation in its sector.
Sir Richard (who owns 51 per cent) and Singapore Airlines (which owns the rest) appointed Deutsche Bank last year to look at Virgin Atlantic's options. Since then both Etihad and Delta have been floated as potential buyers. And although Etihad's chief executive, James Hogan, denied last week that he was considering a takeover, he did not rule out taking a stake in the business. Mr Ridgway refuses to rule anything out, or anything in. "We're watching what's going on in the market and seeing if there are opportunities that will emerge – either through alliances or whatever comes our way," he says. "We don't know what will happen – there's clearly interest and we will see how that develops."
In the meantime, he is keen to talk up the company's selling points, not least its much-prized Heathrow take-off slots. "You can't replicate the position of Virgin Atlantic at Heathrow now," he says.
Even the much-fought tie-up between its rival British Airways and American Airlines has its opportunities, according to Mr Ridgway. Virgin Atlantic has seen slugs of new business from the drinks giant Diageo and a number of major banks in recent weeks as corporate customers that once chose between BA and AA now look for an alternative.
Consolidation in the industry is not the only issue facing the company. Serious economic challenges also lie behind the company's wariness over pilots' pay.
By 2010, global aviation was back in the black after the spectacular squeeze of the financial crisis. But the climate is getting trickier again. And although business travellers are flying again, competition is fiercer for economy passengers. "There is no doubt the market has tightened up since the winter," Mr Ridgway says. "The UK economy is not out of the woods and we're having to fight very hard for business."
The combination of spiralling oil prices, pushed up by the uncertainties of the Arab Spring and government plans to raise the unpopular air passenger duty, is adding to the pressures on airlines. "The cost of air travel is rising," Mr Ridgway says simply. "The biggest driver of change in the aviation industry is the ability to adjust to a world where oil is having such a significant effect on costs."
For airlines, that means being cleverer than ever: flying leaner, lighter aircraft, on more efficient, eco-friendly fuel, and with ever-snazzier cabin designs and in-flight entertainment systems to make that higher ticket price look like money well spent.
Mr Ridgway is "full of ideas" for Virgin Atlantic to adapt to the changes. The company is already recruiting again. It is also expanding its routes – London to Accra last year, Manchester to Las Vegas this, and Gatwick to Cancun in 2012. And Mr Ridgway is watching closely to see which parts of the world are leading the economic recovery: with new A330 planes coming next year, and 15 super-efficient, next-generation 787s from 2014, more new routes are expected. And airlines are continuing to focus on developments on the ground, from speedier check-ins to improving security procedures.
"There are always more ideas than can ever be implemented," Mr Ridgway says, almost wistfully.
CV: Steve Ridgway
* Steve Ridgway joined Virgin Atlantic in 1989, becoming managing directorin 1998 and chief executive in 2001.
* Mr Ridgway started his career working as a sales manager for Cavenham Foods. After a brief stint as a teacher, he moved to Miami and worked for powerboat builders, first Ted Toleman and then Cougar Marine.
* At Cougar Marine he designed and built the boats for Sir Richard Branson's two Virgin Atlantic Challenger attempts on the transatlantic speed record.
* He also worked closely with Chay Blyth in creating the British Steel Challenge and BT Global Challenge round-the-world yacht race.
* Mr Ridgway has three children, lives in London and Hampshire, and is a self-confessed "speed freak" with a passion for fast boats and even faster cars.
* He was awarded a CBE in 2006.
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