Introduction
The aim of this report is to identify the likely future changes in the Political, Economic, Social, Technological and Legal environments of a UK private sector firm – Virgin Atlantic Airways. Using relevant theories, I am going to explain the possible effects of the changes identified upon the firm’s future profitability. What is more, I am going to suggest ways in which the firm could improve its future profitability in relation to the changes I have identified.
Methodology
To write this report, I have used Political, Economic, Social, Technological, Environmental, Legal environments (PESTEL) analysis.
Virgin Atlantic Airways background information
Virgin Atlantic Airways is a British airline ‘established in 1984 as British Atlantic Airways’. The airline was ‘planned to fly between London and the Falkland Islands. Soon after changing the name to Virgin Atlantic Airways Fields (co-founder) sold his shares in the company after disagreements with Sir Richard Branson over the management of the company. The maiden flight from Gatwick Airport to Newark Liberty International Airport took place on 22 June 1984. The airline along with Virgin Holidays is controlled by a holding company, Virgin Atlantic Limited, which is 51% owned by the Virgin Group and 49% by Delta Air Lines. In 2012, Virgin Atlantic carried 5.4 million passengers, making it the seventh-largest UK airline in terms of obdurate passenger volume.’
- [accessed 2/12/2018] https://en.wikipedia.org/wiki/Virgin_Atlantic
Results
Political
- https://www.virgin.com/richard-branson/heathrow-expansion-right-decision [accessed 3/12/2018]
- https://www.bmmagazine.co.uk/news/heathrow-gets-uk-government-backing-third-runway-expansion/ [accessed 3/12/2018]
The UK Government approved the idea for a third runway at Heathrow in London – the first new airplane runway in south-east England since the Second World War. Adam Marshall, Director General of the British Chambers of Commerce said that there are not going to be any delays and excuses on the airport expansion. This decision is aimed at showing that the United Kingdom is a huge part of the global economy and is open to international investors and competitors.
Virgin Atlantic has been providing competition on long distance routes for over 30 years. It is a great opportunity for the airline to be more competitive as at the moment, British Airways has predominated all routes.
- https://www.campaignlive.co.uk/article/exclusive-virgin-atlantic-sees-bright-side-brexit-darkly-funny-campaign/1429763 [accessed 8/12/2018]
The British airline wants to take an opportunity of pound declining caused by Brexit and attract more American people to visit the United Kingdom.
Economic and Environmental
- https://blog.virginatlantic.com/virgin-atlantic-lanzatech-critical-breakthrough-point-new-low-carbon-jet-fuel/ [accessed 5/12/2018]
- https://www.cnbc.com/2018/09/19/richard-bransons-virgin-atlantic-will-fly-with-fuel-from-pollution.html [accessed 5/12/2018]
The British airline since 2008 has been working on technology which could help reduce fuel based on petroleum used by cars and airplanes, and convert carbon emissions into blended ethanol with car gasoline or convert it into a liquid fuel that can be blended into conventional plane fuel. They have been cooperating with LanzaTech’s which produces low-carbon chemicals and fuels without petroleum.
Virgin Atlantic as the first airline has had used low carbon fuel in its commercial flights – ‘LanzaTech’s innovative new sustainable aviation fuel’ has been used in a 747 jet from Orlando to London Gatwick in October 2018.
This solution is economical as the price will be the same as for the lowest alternative jet fuel available on the market. What is more, they want to rival with the price of paraffin oil.
Social
https://www.theguardian.com/business/2011/jun/21/virgin-atlantic-to-vote-on-strikes [accessed 5/12/2018]
https://www.bbc.co.uk/news/business-13863341 [accessed 6/12/2018]
https://www.telegraph.co.uk/travel/travelnews/8589741/Virgin-Atlantic-faces-pilot-strike.html [accessed 6/12/2018]
In 2011 97% from a ballot turnout 94% , Virgin Atlantic pilots had voted for strike demanding a raise, threating transport problems in the summer for thousands of passengers. The strike was planned for July which could be very problematic as the airline is specialised in long-haul flights to Africa, United States and Caribbean – often chosen summer destinations.
It was first UK pilot strike for more than 30 years. As British Airline Pilots Association said, the pilots had not gotten a raise since two years. Virgin Atlantic stated that in the last 2 years three pay rises had have been offered, as they strongly value their crew.
Technological
- https://www.telegraph.co.uk/technology/google/10629467/Virgin-Atlantic-launches-Google-Glass-pilot-scheme.html [accessed 6/12/2018]
- https://www.sita.aero/pressroom/news-releases/virgin-atlantic-first-in-world-to-use-wearable-technology-to-serve-passengers?fbclid=IwAR3t4xtAS4XKO6qmxSVm2QQVTvc6bqCO5baaHAHGd4nmjohBjNJWWWC1KF4 [accessed 7/12/2018]
- https://engageemployee.com/virgin-atlantic-flies-with-wearable-technology/?fbclid=IwAR0BjkMYhz8xP7W2GSiG4iskjyU7LqyS8M0vWFIOWs7Ukh_7gMQFKMkIEQY [accessed 7/12/2018]
Virgin Atlantic in 2014 as the first airline has used in its six week pilot scheme, wearable technology to improve customer service in its Upper Class Wing at London Heathrow Airport. The innovative technology covers a Google Glass and Sony Smartwatches which are directly connected with Virgin Atlantic passenger service system. The airplane staff is informed about flight updates, latest customers’ flight details, events taking place at their final destinations and any foreign language information is translated. The crew is able to welcome each passenger individually, as the application informs about specific tasks for every staff member.
In the future, this innovation could provide personal and more detailed information such as passengers’ dietary.
Legal
- https://www.independent.co.uk/news/uk/home-news/virgin-atlantic-threatens-legal-action-to-put-off-alleged-imitators-5328772.html [accessed 9/12/2018]
In 2007 Virgin Atlantic sued Cantour Aerospace – Welsh seating producer and accused airlines such as Delta, Indian Jet Air, Air Canada and Cathay Pacific of purchasing and placing their flagship herringbone seating. A Herringbone seating is a layout of the seats that looks like the skeleton of a fish. The converting seats into a bed provide more personal space and privacy. This solution is very important for the airline’s Upper Class Suite, as it increased market share up to 12%.
Virgin Atlantic claimed that the airlines used the idea without their permission. As Paul Charles, director of communications at Virgin Atlantic said, they have had the license only to Air New Zealand to install the seats on its aircrafts. Cantour Aerospace did not agree with the statement of breaking the patent law, as they claimed that the seating layout has been used for a very long time.
- https://www.ft.com/content/e6245134-e811-11dd-b2a5-0000779fd2ac [accessed 9/12/2018]
After two years, the High Court rejected the case, as they noticed vital differences between the airlines’ projects. What is more, the concept has been used for the first time by British Airways in 1996 and Virgin Atlantic developed the seat arrangement in 2000.
9.12.2018