As flight activity slows, charter firm narrows focus

Aviation International News » February 2009
January 29, 2009, 4:19 AM

Virgin Charter has had its fair share of ups and downs over the past few months. The charter marketplace suffered a drop in business in late August and September due to the economic downturn, but transaction activity at Virgin now appears to be steadily rising as a result of a shift in clientele, a new business strategy and several new partnerships.

“October was the best month the company ever had,” said Virgin Charter president and CEO Scott Duffy. Business continued “on plan” through November and December and was ahead of target through last month, most notably among corporate clients. Duffy did not provide exact figures but said he is “pleased. One of the biggest trends we’re seeing is that big companies– whole and fractional owners–are trying to get out of ownership, but they still want to fly private. We’re also seeing a high number of redemptions on the jet cards.”

Companies are less willing to part with their money, Duffy explained, and most are looking for better value and greater efficiency. To accommodate these changing needs, the company is focused on improving its “touchless,” or automated, rate. “That’s what customers want,” Duffy said. “They want to be able to punch something into a Web site and get all the information they need to conduct the transaction, manage the trip and make changes. And now they don’t have to pick up the phone if they don’t want. They can just enter a request.”

Virgin Charter is hoping to automate about 65 to 70 percent of the booking and post-trip management process. “You’re never going to get to 100 percent,” he said, explaining that more expensive, complex itineraries and last-minute changes–in any segment of the travel industry–often require the human touch. “The cruise ship industry shoots for a 65- to 70-percent touchless rate. Airlines might shoot for an 80- to 90-percent touchless rate. Our goal is 65 to 70 percent, but that’s for the entire process: you’ve entered the trip request, you’ve flown the trip and we’ve sent you an e-mail asking you to rate the trip.”

Automation does have its downside, however. Duffy said the company’s goal is to have a “smaller internal team,” and in late October Virgin Charter confirmed a number of staff reductions. “Automation eliminates much of the manual effort once required to perform this work…[and] enabled us to more effectively and profitably service our clients while enabling us to reduce unnecessary costs,” a spokesperson told AIN.

Automation, and the technology it requires, is also expensive. “It has cost millions of dollars,” Duffy admitted. “It takes time and a lot of resources.” Although a number of companies have approached Virgin Charter about the possibility of investing in the business, the company declined the offers, Duffy said. “At the end of the day we have a long-term commitment with Virgin,” he said. “From a financial standpoint, this isn’t an area of focus.”

New Clients, New Partnerships
Virgin Charter is also hoping to move away from individual charter customers and “one-off buyers.” The company in recent months signed partnership agreements with three luxury travel networks, Signature Travel Network, Virtuoso and vacation.com; and two travel management companies, Radius and GetThere. Through these partnerships, Virgin hopes to “focus 100 percent of our efforts on the large bulk purchasers,” Duffy said, adding that the company’s long-term goal has always been to focus on corporations and travel companies.

“We knew it would take time to sign these agreements, so while we were doing that we spent a lot of time focusing on individuals and one-off travelers. But we just don’t think that’s the market we want to be in,” he explained. The travel network and travel management customers are “highly targeted and highly qualified users, as opposed to users who come onto the Web site and try to purchase a $100 empty leg.”

In partnership with the five companies, Virgin Charter will have direct access to more than 5,000 corporations and 20,000 travel agents in 20 countries. By the end of this year, that number will increase to 25,000 travel agents in 25 countries. “People might not realize that Radius does about $20 billion in annual travel billings, primarily with the largest corporations in the U.S.,” Duffy said. “Companies like GetThere last year alone did $10 billion in travel bookings. Seventy percent of the BTN 100 and a majority of the Fortune 200 purchased all of their travel using the GetThere travel tool.”

Partnerships with Virtuoso, Signature Travel Network and vacation.com provide access to thousands of travel agents, who book charter flights for their clients using the Virgin marketplace. “We built a whole subset of our business that’s dedicated to travel agents,” Duffy explained. “An agent would enter a trip request just like a consumer would, but they are able to send the quote [to their customer] as if it came from their company. The end customer does not know he’s getting a quote through us.” Combined, Virtuoso, Signature and vacation.com book $15 billion worth of travel arrangements per year, Duffy said.    

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