Virgin American Airlines Revamps Business Model

Dec 2, 2012 by

Airlines provide a great mix of different types of people, with varying backgrounds all placed into one situation. Virgin American Airlines, in a massive rebranding effort, is hoping to target a particular type of customer: those looking for luxury.

In an industry as competitive as the airline industry, Virgin’s competitors distinguish themselves with low prices, and flexible scheduling, neither of which Virgin is able to offer. Virgin has 52 aircrafts that make roughly 150 flights a day to selected cities. Most of its competitors have 10 to 20 times that number.

“We are focused on customers who want a more comfortable way to spend their precious time,” says President and Chief Executive Officer David Cush.

To revamp the airline, Virgin has hired former semi-pro skateboarder Jesse McMillin as the in-house design director. Hoping to inject a personalized touch to brand, McMillin is very much about catering to the customers’ needs and providing the unexpected. From the chic uniforms designed by Banana Republic, to bracelet-like baggage tags, to the safety features card reminiscent of a comic strip, no detail is too small to consider.

The recent redesign of Virgin’s San Francisco hub features a red carpet, fresh flowers, wine and cheese, and a yoga studio, among other amenities catering to those desiring comfort and luxury. The aircrafts themselves have been redesigned to give of a swanky, nightclub-esque feel with dim lights, real silverware, and individual amenity kits.

At the end of the day, despite all the bells and whistles that Virgin may provide, fuel costs remain a major issue. The company, founded in 2004, was not profitable for the first five years, and has continued to struggle since its establishment. In 2011, Virgin’s operating losses were $27 million. Moreover, other airlines also provide amenities and luxury services to attract a particular type of clientele, meaning Virgin may need something else to maintain its competitive advantage.

But all hope isn’t loss. Last year, Virgin added new planes, expanding its capacity 29 percent while most other airlines remained steady. And its first class section is consistently booked, with prospects to expand the section. Virgin aims to show profits this year, and has the potential to release an IPO sometime in the next two years.

Sources: Bloomberg Businessweek

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