Outlook It has not been a bad few days for Virgin Atlantic. On Tuesday, Sir Richard Branson's airline announced it had been successful in heading off a potentially humiliating strike by its pilots. Yesterday, Virgin was able to reveal it has returned to the black over the year just gone. All very satisfactory, one might think.
Still, the biggest question of all for Virgin remains resolutely unanswered – where does the airline's future lie in an industry where consolidation continues to be the dominant theme? Only yesterday, Virgin's results announcement coincided with the unveiling of a share swap between Malaysia Airlines and AirAsia.
We might have expected an answer by now. After all, Sir Richard asked Deutsche Bank to begin reviewing his options last year. Since then, Virgin's founder has publicly conceded that the days of his majority ownership might be numbered. Yet plans for a deal seem to be stuck in the departure lounge.
The simple explanation for that is the slowing pace of the global recovery. In the second half of last year, when the outlook looked healthier, airline trading improved dramatically. Not only did Virgin look a more attractive target in that context, but potential suitors expected to be getting richer. Once the doubts began creeping in, however, there were second thoughts.
Virgin itself insists there is no imperative for change – it points to the substantial investments it continues to make as evidence of the viability of independence. But the status quo is becoming ever harder to maintain. If it looked tough for Virgin to stand alone before last summer, the decision by regulators in Europe and the US to clear the transatlantic co-operation deal between British Airways and American Airlines – so bitterly opposed by Sir Richard – has made the matter much more pressing.
The simplest thing would be for Virgin to join one of the big airline alliances – most likely Star or SkyTeam – though doing so has never appealed to Sir Richard, whose business ventures are always built on a foundation of brand control.
If not that, what about a merger? Virgin's transatlantic routes and its slots at Heathrow make it an attractive proposition for any number of partners, even if the shortlist of candidates is shorter today than a year ago. That, however, would see Sir Richard finally lose control of his pride and joy.
One thing is for sure. While Virgin ponders its future, the trading environment is not going to get any easier, even if the falling oil price will help with fuel costs. The faltering global recovery does not bode well for the airline sector. The sooner Sir Richard bites the bullet, the better.Reuse content