Topic of the Week: Virgin America Shakes Up Planning and Revenue Management

August 3, 2012 CF 18 comments

Virgin America decided that it was finally time to shake things up. John MacLeod is the new head of Planning and Sales. There’s no doubt in my mind that the Planning side needed changes, but can it be salvaged? What would you like to see happen?

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Written by eponymous coward on August 3, 2012. Reply

They’ve actually been better lately: ORD and DFW as destinations instead of using the dartboard to pick YYZ and SNA.

Now it’s a matter of holding the line on capacity, and maturing the markets before the cash runs out.
Written by Ben on August 3, 2012. Reply

So did I miss something in that release? Is he replacing someone? Or are they deciding that they FINALLY need someone in charge of this sort of thing?
Written by A on August 3, 2012. Reply

What does a head of “Planning and Sales” do? Is this the guy that picks airports to expand into or is this the guy that creates the strategy that they want to be a business man’s airline serving those markets? Oh wait, they fly to Vegas and all over Mexico…guess that business only plan is gone. They fly trans-con flights with a couple token spots in flyover land…guess they really only appeal to a niche of business travelers there. Sounds to me like they need a cohesive plan.

I like the alternative airline for business travel approach but they’ve gotta step up the locations they fly through. Grab the Fortune 500 and locate large HQ locations and start flying there and market to their business. Obviously Palm Springs and Cancun should go away and get replaced with places like IAH, DEN, MSP, ATL, CLT, DTW. Screw the leisure passenger, leave that to Spirit, and go to where the O/D business travel is that you aren’t serving. Get people to really defect from UA and DL and build a high profit customer base.
- Written by Noah on August 3, 2012. Reply
  
  and just how long will cash last flying into other airlines’ hubs? With so few planes, they couldn’t match the route network of the legacies right away. They need to work on getting a cash cow market (like B6 and the Dominican Republic) to help fund future growth…
  
  I think the issue is not in sales, but higher. Time for a new CEO…
  - Written by A on August 4, 2012. Reply
    
    I don’t think they need to match the legacies route network, they just need to fly to the few places that matter. My home airport is MSP, there are many major corporations here flying people to a lot of the places that Virgin already services. It’s a mistake for younger airlines to avoid entrenched hubs of legacies. Locals don’t like the dominant carriers because of lousy service and high fares. I fly to DFW a lot, although I have status on DL I often take SunCountry because it’s a better experience, i.e. no regional jets. Virgin could tap that market if they flew more places where the business traveler is at.
- Written by David M on August 3, 2012. Reply
  
  I don’t think focusing only on business markets and cutting destinations like PSP and CUN would help VX. The leisure markets help to entice the business traveller with being able to redeem frequent flyer points for a vacation.
  
  I still remember seeing ads from United during the days that Shuttle by United was competing with Southwest, using Mileage Plus as a major factor: “Their frequent flyer program can get you to Omaha. Ours can get you to Osaka”. The partnership with Virgin Australia and Virgin Atlantic helps but I don’t think it’s enough, as not everyone is going to want to cross an ocean for vacation.
Written by Ted on August 3, 2012. Reply

I think it’s a sign of a weak CEO. This will be their 3rd VP of planning in 4 or 5 years. The CEO should be providing a vision and the VP of Planning should be coming up with a way to execute that vision. If that’s not happening, maybe the vision is unachievable.
Written by phllax on August 3, 2012. Reply

I actually think the route map as it stands now is a good mix of business and leisure destinations, they just need to concentrate on attracting the former. With that in mind, they need to tweak their schedule a bit from LA.

Most of the first flights to the business destinations leave too late for business people. BOS is 8:20, ORD is 8:45, DFW is 9:05, PDX is 11:35, SEA is 9:20, PHL is 11am and the first flight of the day to JFK is 7:35am. All of these arrive too late in the day to make them productive. If they want to increase revenue and yield they’re going to have to move more in that direction.

I think with no more growth this year and possibly next we will see a great improvement in finances. Remember they opened 5 destinations (including DCA) within the past 12 months which isn’t an inexpensive thing to do.
Written by Mike on August 3, 2012. Reply

Ted is spot on. If you are churning second level management, they are receiving absolutely no direction from the CEO and this means the company is “Flying” (Pun intended) by the seat of its pants!
Written by Eric Olesen on August 3, 2012. Reply

This will be their third destination — Brian Clark was there from launch to 2008, and Diana has been there for the past four years.

While I’ve never had a chance to fly on them, they appear to have a great product, but as mentioned above, where’s the network?

With the exception of LAS-JFK, it’s like they can’t do anything that doesn’t involve either LAX or SFO, or that’s more than 50 miles from the ocean (OK, I know LAS, DFW, and ORD aren’t on the coast, but hopefully you get the drift).

Some of us were skeptics all thru the permitting phase, and it’s not surprising to me six years later that they’re still floundering to find their niche. Allegiant and JetBlue were hard acts to follow, and while the majors may have been willing to give up a few backpackers (their words, not mine), they’re a little more protective of the premium customers that Virgin was seeking to attract.

So maybe it’s the CEO, but it’s also their business model. They launched just as the financial meltdown started, and never adjusted to compensate for what was a brutal couple of years as far as business travel was concerned.

Had they come into the US like Virgin Blue did in Australia, they might have had more of a fighting chance. But they didn’t. They stuck with the premium model in mostly business markets, and I think that’s what has hurt them most.

To be entirely snarky, it’s like someone looked at Virgin Blue, Jet Blue, and decided that Blue was somehow important; again, with the exception of DFW, they only serve “blue” states…

If Cush and Carty aren’t already quietly shopping for a merger partner, maybe they should call Doug Parker and ask for the same deal being offered to AA.
- Written by Eric Olesen on August 3, 2012. Reply
  
  Just noticed that the wonderful iPad spell fixer did a number on me…. This will be their third VP of planning… Not sure where it got “destination” out of that… Oh well.
  
  It probably hasn’t helped much that DL is codesharing with VA and DJ… How can you stand by and let your namesake and fellow Velocity partner wind up being colocated with DL at LAX? How much flow traffic winds up on DL instead of VX because of that misstep?
Written by David SF eastbay on August 3, 2012. Reply

Are they trying to be to ‘hip’ for the masses? A coworker flew them and didn’t like all the interior light color changes, gave him a headache.

They should look at some seasonal flying like other airlines do, ski destinations in winter, etc.

If they are going to focus on both SFO and LAX then they need to fly more in the west to get more north/south connections via SFO and more into Mexico via LAX/SFO. They should also look into extension beyond their midwest points to the east coast.
Written by Don on August 3, 2012. Reply

Plain (but not simple) solution for VX. All the top leaders sit down with each other and recognize what is costing them a lot of money. Put a stop or slow down to that. Find out what is bringing in money. See if they can keep that at a steady pace or increase it.

If they can’t do any of this; it’s time for some new people to step in and make it work. No more cash infusions; no more increasing the mood lighting from 96 lights to 1897 shades of lighting. Make money.

They have had 5+ years to do so. Stop blaming the high fuel prices, or costs of new aircraft, or opening of new locations. What did they think they were doing when they started flying? The public loves them, they have an awesome product (probably the best), they have great pricing (not too cheap and not too expensive). Time to replace the CEO if he can’t make it work by years’ end.
Written by yo on August 3, 2012. Reply

I swear, I thing Virgin America’s entire strategy has been “look, we have Virgin in our name…people will love us”

No, revenue management, planning, going to places that make you money rather than as a vanity move and inaction..that is how to do it right.
Written by Nick Barnard on August 3, 2012. Reply

I wonder if MacLeod will run his corner of the business well enough that in a year or two he’ll be CEO. I’m betting the boar is getting tired with Cush.
Written by Don on August 4, 2012. Reply

Nick may be right. Cush can say whatever he wants. In the end numbers matter. He said they would be profitable in 2010, then 2011. Now he is predicting a full year profit for 2012. And the first quarter already had them 76 million lost. So they will have to make that just to break even in the next three quarters. I don’t see that happening.
Written by Drew on August 5, 2012. Reply

Virgin needs to stop spending money on launch parties, anniversary parties, retirement (termination) parties, refresh parties, parties to celebrate all the successful parties, new uniforms that make their pilots look like clowns, parties to celebrate the new uniforms, buying every crew member fabulous new luggage that is so gay it cannot even stand straight, more parties to celebrate all the money wasted on the new luggage…
Written by Bill from DC on August 6, 2012. Reply

Getting those coveted DCA slots will help them open up a whole new market. Oh, they were already at IAD? Sorry, never mind!