Here I come...

Sir Richard Branson has finally confirmed that his airline Virgin Atlantic will be launching services to Dubai. As he tells Anil Bhoyrul, the competition can expect a run for its money.

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By  Anil Bhoyrul Published  July 3, 2005

Here I come…|~|BRANSON-200.jpg|~||~|THE POSSIBILITIES, COME NEXT APRIL, ARE ENDLESS. One involves a man dressed in Arab headwear, parasailing off the top of Emirates Towers. Another involves a stunt at the Burj Al Arab involving helicopters, skydivers and airhostesses. A third revolves around the idea of a mass parade of thousands, in a sea of red and white, across the centre of Dubai. Whichever he settles upon, by the time the stunt is over Dubai — and the whole of the Arab world — will be sure of one thing: Sir Richard Branson has arrived. After years of planning, the Virgin Atlantic chairman has finally given the go-ahead to launch flights between London and Dubai. The start of the service, next April, will not only be accompanied by the biggest publicity and marketing stunt ever seen in Dubai, but almost certainly lead to a ferocious price war with Emirates Airline. Branson himself is hardly shying away from a fight, explaining: “We expect to give our competitors a run for their money especially in the business class market where our Upper Class Suite is expected to pick up a lot of our rivals’ passengers as well as many more awards.” Services on Virgin Atlantic between London Heathrow and Dubai will launch in April 2006 and will be operated with Airbus A340-600 aircraft. Flights to Dubai will start with four services per week and build to daily by mid-Summer 2006. It is believed that on Upper Class, Branson will offer Upper Class return tickets between Dubai and London for around US$3000, undercutting both Emirates Airline and British Airways by up to US$400 on each ticket. Economy class return tickets between Dubai and London are currently priced at just over US$1000 on Emirates Airline. Sources say Virgin will enter the market at nearer US$700 per ticket. It is thought that the airline will also offer special holiday deals for passengers also booking hotels, which could bring the price of the actual Virgin Atlantic Upper Class flights down another US$500. A Virgin Atlantic source said: “With the various combinations we are examining, you could save nearly US$1000 by flying Upper Class on Virgin as opposed to business class on Emirates. When you consider that our service includes the widest, totally flat beds on any airplane in the world, and that there is not a single flat bad on any Emirates Airline plane, we think we will be offering a very good deal.” Branson explains: “It is an extremely popular and fast-growing route and so we expect to pick up our fair share of the market and do well on the route. There is still huge investment going into Dubai which is expected to continue for many more years, so the market will undoubtedly grow further. It will be a challenging route as we will be up against a number of carriers including Emirates, one of the best airlines in the world, but Virgin Atlantic has always thrived on competition and we believe our entry into the market is good news for passengers.” He adds: “Before 9/11, we were quite close to making a decision on going to Dubai. There is no doubting that Dubai is a first-rate international airport. But we are also aware of the major commitment Dubai has made to land and property development.” So can Branson afford to come in at a lower price? Things haven’t been this good financially for six years. Earlier this year the airline delivered its highest profit since 1999 after cost controls and new routes helped to offset rising fuel prices. Virgin, which aims to double in size by the end of the decade, also announced new routes to Montego Bay in Jamaica from April next year, together with an extra service to Bombay. However, the company said that overcapacity on its core North Atlantic route allied to fuel costs and slowing economic conditions had made trading challenging. Branson tells Arabian Business he was pleased with the performance at a time “when many leading players in the airline industry continue to struggle”. He attributed part of the improvement to the introduction of Upper Class Suite, which had “taken the market by storm”. But he adds: “Rising oil prices undid some of our good work and regrettably we were left with no option but to introduce fuel surcharges from May 2004, although these only recovered around one third of the Pounds 60 million of extra costs we faced over the year.” Virgin Atlantic, which has changed its reporting period, hit profits of US$125 million for the year to February 28, 2005, its highest for six year. Turnover increased to US$3.2 billion from US$2.4 billion last time That compares with profits of just US$40 million for the 10 months to February last year, from turnover of Pounds 1.27 billion. Its aeroplanes carried a total of 4.4 million passengers, up from 3.4 million in the previous reporting period. The unlisted company, of which Virgin owns 51% and Singapore Airlines 49%, predicted that it would continue annual growth of at least 10% by expanding its fleet. It has launched new routes to Australia, China and India and will start flying to Cuba next month. It is also increasing services to India and Sir Richard has launched an airline in Nigeria, Virgin Nigeria Airways, in which Virgin Atlantic has a 49% stake. Virgin Atlantic added three Airbus A340-600 aircraft during the year, taking its total fleet to 31. In August last year, it announced an order for up to 26 more Airbus aircraft worth US$5.5 billion. The airline’s cargo arm, Virgin Cargo, is said to have had a strong year, benefiting from the carriage of 1250 dogs, cats and other pets — including a surprisingly large number of ferrets — which was double the previous year’s total. Branson says: “Yes, the figures speak for themselves. This is a very strong and very positive time for us. And so we are looking to do some very positive things. I think the competition needs us, and I hope we will be giving them a lot to think about.” But Branson can expect a strong fight back from Emirates Airline. Its 73-strong fleet is to grow to nearly 200 by 2012. For the year to March 2004, Emirates Airline recorded profits of US$476 million — the highest of any airline in the world. It has also ordered 45 of the new Airbus 380 superjumbos, a third of the entire order book. So far, Emirates Airline has passed on its fuel surcharges to customers, but more significantly, maintained its prices on the London-Dubai route throughout the past year. Given Virgin’s strong financial health, Branson can afford to take a slight hit on profits in order to subsidise his Gulf service, something Emirates has no intention of doing. “All competition is a threat — how you cope with such competition determines whether you make a profit at the end of the day — and your customers keep coming back,” Mike Simon, senior vice president, Corporate Communications, Emirates Airline says. “There are many airlines already serving this route and we do not expect a price-war [with Virgin Atlantic]. Competition is also good for the consumer — and another airline will help to develop the market even further,” said Emirates’ Simon. “There are more than 10 airlines serving UK from Dubai and we believe there is a big cake, big enough for all of us,” he adds. The battle proper will start in April, and in the coming months the focus will be on just how big Virgin Atlantic’s Gulf marketing plans are. Five years ago, when launching a route to Las Vegas, Branson parachuted out of a helicopter, dressed as Elvis Presley, and landed in the Nevada desert. Two years earlier, as part of a launch of flights to Shanghai, Branson hired over 2000 locals to dress in Virgin red and drive through the city in bicycles. A Virgin source says: “Whatever Richard does in Dubai will be big. Everyone will know he has arrived.” In many ways, he already has. ||**||

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