Virgin Atlantic’s Austin Expansion – Analysis

HOSTED BY: https://1airtravel.com

TODAY'S READ

Recently, news broke that Virgin Atlantic would be opening a new route to the US. From the 25th of May, customers will be able to fly directly to Austin, Texas, on a Boeing 787-9 aircraft. Departing from London Heathrow Airport (LHR) and arriving at Austin Bergstrom (AUS), flights will run on Sundays, Mondays, Wednesdays, and Fridays. Timings for the flights are as follows:

Outbound: Departing London at 11:35 am, arriving in Austin at 4:05 pm Inbound: Departing Austin at 6:05 pm, arriving in London at 9 am the following day

The news will no doubt be a welcome boost to the city of Austin, following the relaxation of transatlantic travel restrictions last year.

Why Austin?

Austin is the capital of Texas, the US’ second-most populous state. Since 2010, the metropolitan area of Austin has seen a population increase of 34% – now, around 2.3 million people live in the area. This significant population growth has led to Austin being labelled the fastest-growing major metropolitan area in the US. Following the pandemic, many Americans have moved to Austin, citing a lower cost of living than more established metropolitan areas in California and New York.

Since the 1990s, Texas has been a Republican Party stronghold. Much of modern Republican thinking is centred around creating conditions favourable to business and enterprise, typically meaning that lawmakers seek to lower taxes. As such, Texas has a tax rate that businesses see as favourable and has attracted some large names to the state. Two of the most notable companies establishing operations in Austin are US tech giant Apple and EV manufacturer Tesla, the latter of which is moving their headquarters to the city.

Competition

The only other airline offering direct flights from London to Austin is British Airways, which will serve the Texan capital with one flight daily by the time Virgin Atlantic enter the market. From 25/05/22, ba.com is showing the following schedule, utilising an Airbus A350 aircraft:

Outbound: Departing London at 11:50 am, arriving in Austin at 4:15 pm Inbound: Departing Austin 6:20 pm, arriving in London at 9:45 am the following day

With flights departing within fifteen minutes of each other, it is clear that the London to Austin route will be highly competitive. Therefore, it is interesting to look at how the two airlines price their tickets. The following table has been produced by taking fares presented on virginatlantic.com and ba.com respectively. Fares were searched for on 16/01/2022, between 1345 – 1445 GMT. The prices listed are for a seven-day return. The dates highlighted in green show when both airlines are operating a direct service. N/A is noted for BA in the ‘Economy Delight’ section, as they do not offer a comparable class.

As the table shows, fares are matched on three of the four days in which both carriers are serving Austin directly. Curiously, on Wednesday, BA fares are twenty pence higher across all classes apart from Premium Economy, which is £601 more than Virgin. It is likely that BA has already sold several premium economy seats on this date, and their revenue management systems have raised the price considering the reduced supply.

When Virgin Atlantic are not serving Austin directly, customers have the option of flying to Atlanta with the airline and then boarding a connecting Delta flight to the Texan capital. On Thursday, Virgin are undercutting British Airways by ninety pence, apart from in premium economy when they are £9.90 cheaper. On Saturday, there is a greater disparity, though patterns still emerge. British Airways are £87.10 cheaper in economy light and economy standard. In premium economy, Virgin are £255.10 more expensive than their competitor, whilst their upper-class offering comes in at £4.10 more than BA. Finally, BA fares are £4.10 lower across the board on Tuesday.

British Airways will undoubtedly be doing everything they can to keep as much of their market share as possible on this route, with price matching likely to remain. It will be interesting to see how Virgin Atlantic fare on this route in the months following their inaugural flight.