Virgin Atlantic eyes Gatwick returns as it takes off from Heathrow’s third runway

Virgin Atlantic left Gatwick airport at the height of the pandemic in 2020 – Simon Dawson/Bloomberg

Sir Richard Branson’s Virgin Atlantic is examining a return to Gatwick and flights from regional airports such as Bristol after eyeing 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 expanding the Virgin Holidays arm as part of its growth plans between 2025 and 2030.

The blueprint, which is not yet publicly available but is known internally as VX30, will aim to increase revenue by 20pc over the £3.5bn expected this year, Mr Weiss said.

He said: “I think we need to rule out a third runway, which would result in slots being booked at Heathrow or flights from Gatwick and secondary UK cities.”

Growth at Virgin’s main Heathrow base remains the preferred option due to the high margins and better connectivity between flights there, but the new growth plan will assume that scope will be limited.

Heathrow, which operates at near capacity, put plans for a third runway on hold during Covid when the project was already facing renewed political and legal challenges, and has yet to formally revive it.

Willie Walsh, the former head of British Airways who now heads airline industry trade group Iata, said last week that a new runway might not be built at Europe’s busiest hub.

Still, Virgin will continue to seek available operating slots at Heathrow on an ad hoc basis, Mr Weiss said. It has managed to acquire five daily pairs over the past two years, including slots bought from KLM and others seized and reallocated from Russia’s Aeroflot.

He said: “We’ve collected slots and we’ve bought slots, but it’s a limited pool and it’s very expensive. And it’s unpredictable because you have to rely on the slots being available.”

A handful of Virgin slots are currently idle 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 to push Heathrow to agree to plans that would see Virgin build its own dedicated terminal at Heathrow.

The facility would join British Airways’ operation at the airport’s Terminal 5 and be shared with partners Delta and Virgin in the global SkyTeam alliance.

As it looks beyond Heathrow, Virgin could return to Gatwick.

The airline operated there until 2020, when it withdrew from the airport during Covid. Stewart Wingate, Gatwick’s chief executive, told the Telegraph earlier this month that he would welcome Virgin back “as soon as possible”.

Virgin continues to operate slots at Gatwick under a so-called babysitting agreement with EasyJet, which allows the jobs to be clawed back.

Mr. Weiss said that while a return was a long-term possibility, it would not be done lightly and the airport was no closer to relaunching then.

The Virgin boss spoke on a flight to Las Vegas, where the company is celebrating its 40th anniversary of launching services from Manchester to the gambling and entertainment mecca.

Mr Weiss said Manchester can expect to gain one or two new destinations a year under the airline’s expansion plan, while flights may also be added to Bristol. Virgin has its only other base in the UK 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 accommodate the additional flights, Virgin is looking to lease additional aircraft to expand its fleet beyond the 45 planes the company will have once the last A350 jet from its current order book arrives.

Mr Weiss stressed that all aspects of the strategy must deliver profitable growth and do nothing to undermine the progress of his VelocityX plan, which sought to stabilize the airline after it came close for the fallout during Covid.

He said: “We went through the valley of death and came out the other side.”

Virgin is on track to post record revenue this year and return to 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 debt incurred during Covid.

The company could seek to reduce this burden by raising fresh equity to pay off 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 seem to be where we are. Our job in management is to generate cash, service the debt and strengthen the balance sheet.”

VX30 is likely to see an expansion of the Virgin Atlantic Holidays arm, which generates 20pc of revenue, as the business also helps fill Virgin planes.

Other efforts will focus on extracting more value from the collaboration with Virgin Flying Club and the Virgin Red rewards club.

Leave a Reply

Your email address will not be published. Required fields are marked *