AFA - Aerospace Forum Asia

Special Breakfast
7 December 2004
Mr. Steve Ridgway, CEO Virgin Atlantic
Mandarin Oriental Hotel, Hong Kong
Jonathan Sharp reports

Virgin Atlantic Coming of Age . . .
but No Loss of Entrepreneurial Dash

At the conclusion of a typically fluent and forthright - some might say Bransonesque - tour d’horizon of the aviation scene, Virgin Atlantic Airways CEO Steve Ridgway gave some cautionary advice on Hong Kong’s burning aviation issue of the day, namely plans for partial privatisation of Hong Kong International Airport.

Responding to a question from Aerospace Forum Asia President Martin Craigs, who noted that some commentators have suggested that Hong Kong should follow the example of the British Airports Authority, Ridgway said: "We as airlines have to shout and be very, very tough with our relationship with the BAA , and also try to keep some real backbone with the regulator to make sure that that position is not abused."

Giving examples of how airport authorities should not behave during crises, Ridgeway noted that following 9/11 when airlines were battening down the hatches as traffic plummeted, the BAA’s attitude was: "Oh God, we’ve got less traffic, so we’ve got to put the prices up."

"But at the end of the day, airline margins are so wafer-thin you can price yourself out of the market, and I think here there’s a big competitive issue, and CLK can’t afford to become uncompetitive, So there’s no doubt there’s a tightrope to walk."

Virgin Atlantic has managed to survive many a white-knuckle tightrope walk during the past five years of successive crises, Ridgway said during his breakfast presentation at an event sponsored by the Hong Kong British Chamber of Commerce and KPMG, and supported by the Forum.

Virgin was of course by no means immune to the ups and downs of the airline cycle, which has been "absolutely vicious" in the past five years, Ridgway said, stressing that the big difference that has given his airline an edge has been to give high priority not just to safety issues but also to what the customers want. "To actually put a customer-facing group in charge of an airline was quite a brave and risky decision."

He noted that even Rod Eddington of arch-rival British Airways had recently "had to admit that actually Virgin Atlantic had probably made British Airways a better airline."

Ridgway was in Hong Kong for the inauguration of Virgin’s Hong Kong-Sydney service, for which he gave credit to the Hong Kong government for opening up the market "and making proper and full use of that amazing facility at the airport." (by contrast, he termed UK airports "awful").

Looking to the industry’s challenges ahead, Ridgway lambasted “ridiculous?regulations emanating from the Brussels bureaucracy. He cited, in particular, new requirements on mandatory compensation in event of denied boarding, plus the raft of security costs that are being layered on the airlines. “The world has gone mad…there is no rationale for a lot of these regulations, with no consistency at national or international levels."

Ridgway added: "Sooner or later the regulators have got to release the shackles from the airline industry and let it become a properly market-driven organisation."

A big test case, he said, was in the negotiations between the European Union and the United States about open skies in the North Atlantic.

"Certainly from where we sit at Virgin Atlantic we are determined that we do not sign up to the US version of open skies, because it is not open skies." Cathay Pacific could not agree more.

On the airline side, consolidation was inevitable. "This industry is still operating in this amazingly regulated world; it’s the last great global industry that hasn’t sorted itself out yet in consolidating, and that’s the big push for the next five years."