Corporate Strategy Case Study

Virgin Atlantic’s Business-class-only Airline: Emerging Threat to Niche Air Carriers?

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Abstract:
In 2007, the open skies pact between Europe and US was rapidly changing the competitive scenario on transatlantic routes. The small BCO (business-class-only) carriers like Eos, MAXjet, Silverjet, and L'Avion grew significantly creating a niche market on the New York-London route. Though all major traditional carriers like British Airways, Virgin Atlantic, United Airlines and American Airlines had well-established business-class services, these new niche players successfully positioned themselves against these established players. The success of these small niche carriers forced the established carriers including Virgin Atlantic to re-assess their services and networks. In June 2007, Virgin Atlantic announced its plan to start BCO service on various transatlantic routes between New York and various European destinations. Though Virgin Atlantic held significant competitive advantages, the first mover advantage of these small niche players posed a major challenge to Virgin Atlantic. How well Virgin Atlantic can position itself in this niche market was yet to be seen.

Pedagogical Objectives:

• To understand the dynamics of the transatlantic aviation market.
• To understand the factors that led to the emergence of the transatlantic BCO market.
• To analyse the positioning of small niche players and their strategies.
• To discuss the entry strategies of established players in emerging niche markets.

Keywords : Transatlantic aviation industry; Deregulation; Open skies pact; Market entry strategies; competitive advantage; Growth strategy; Niche market; Business travel; Virgin Atlantic; Business-class-only (BCO) services; Growth strategy; Brand positioning; Product cannibalisation; Market segmentation; Eos, MAXjet, Silverjet and L'Avion