With the addition of three new routes, Virgin needs to insure that they are able to maintain the high load factors that they pride themselves on. To accomplish this, they should use yield management methods to determine their optimum capacity for cargo and passengers. For passengers, this data could be accomplished by analyzing the seasonal travel trends from previous years in addition to monitoring their competition in those new markets.
To determine the amount of space needed for cargo, Virgin should approach their frequent customers to see when their peak cargo times are. Additionally, they should work closely with travel agents and brokers (1994 was pre-internet travel boom), selling them blocks of seating so that they are able to reach or come closer to the optimum capacity on each flight. By working with travel intermediaries such as tour packagers, retail travel agents, and specialty channelers as well as with the cargo industry, the Virgin sales department will be positioned to match their capacity with demand.
Another way to manage their capacity is to shift the demand to meet capacity on all flights. By following the suggestions in figure 14.3, Virgin will be able to manage their demand and capacity during peak travel times and also slower times. First, a computerized reservation system should be created that constantly tracks the capacity on each plane. This system will be pivotal in determining trends facing capacity and demand.
When the demand is high, Virgin could offer incentives to customers who are willing to travel during non-peak times. Additionally, there could be an express check in for all Upper and Middle Class flyers to eliminate the waiting time and buildup at the ticketing counter. Finally, during peak hours, no discounts should be accepted or offered because that would only encourage people to fly during already busy times.
Although shifting demand could help Virgin manage their capacity, the must realize that it will mostly apply to pleasure travelers since business travelers are usually not able to shift their needs as they please. To account for this, the blocks sold to travel intermediaries should be lowered during peak times to allow more space for pleasure travelers and last minute business travelers. An issue that may surfaces while managing capacity is Virgins pricing scheme. However, looking at exhibit 9, their closest competitor has higher prices for the majority of their flights. Therefore, if Virgin raised fares during peak times, it is feasible to believe that the other airlines would be doing so as well and not cause hardship for Virgin.
Conclusion
At the time of this case, Branson managed a successful airline company with a unique corporate culture. The arrival of a new decade is perfect timing for new routes to be offered. However, for its success, Virgin must pay close attention to internal happenings as well as expansion. They must insure that their corporate culture is not diluted during the expansion. Sometimes when a company expands, their distinguishing factors are muddled and the profitability and well being of the company declines. Virgin Atlantic Airways is built on its originality and attentiveness to customer desires. Without those factors they are nothing more than their closest competitor.
