Reveals that his carrier is holding serious discussions concerning the purchase of this Virgin subsidiary. If consummated, it would be the first takeover of a Western airline by a Russian carrier. The offer will be taken seriously enough by Virgin Express executives that the Irish subsidiary will be allowed to continue flying from Shannon to London (LGW) until at least March 15. The Brussels route, will, however, be closed on January 15.
On March 5, the Russian newspaper Vremya Novostei will report that Aeroflot has, indeed, purchased a 59% stake; none of the principals will comment, promising more detail later. The report will turn out to be inaccurate and when arrangements cannot be completed, Virgin Express (Ireland) will be formally shut down on March 16.
VIRGIN EXPRESS-EUROBELGIUM AIRLINES, LTD.: Building 116, Melsbroek Airport, Melsbroek, B-1820, Belgium; Phone 32 (2) 752-0511; Fax 32 (2) 752-0520; Http://www. virgin-exp. com; Code BQ; Year Founded 1996. On February 19, 1996, British entrepreneur Richard Branson holds a press conference to announce that his Virgin Group has plans to take over the EuroBelgian Airlines, S. A. for operation as a subsidiary of Virgin Atlantic Airways, Ltd. Current majority-owner City Hotel Group plus a small group of private investors will receive a reported ?43 million ($67 million) for a 90% stake in their regional. The acquisition includes the EA subsidiary Air Provence Charter, S. A., based at Paris (CDG).
The takeover is completed on April 30 and the carrier is renamed Virgin Express-EuroBelgium Airlines, S. A. (to also be known as Virgin Express Airlines, S. A.), and is placed under the direction of former Mesa Airlines executive and Continental Express CEO Jonathan Ornstein. He oversees a workforce of 250 and a fleet that includes a mix of 12 B-737-3M8s, B-737-3Y0s, and B-737-33As and 1 B-737-4Y0. A Mesa Airlines and Continental Express colleague of Ornstein’s, James Swigart, is recruited to serve as chief financial officer.
As might be expected, given the history between VA and BA, the B-747-436 chartered by the previous owners from British Airways, Ltd. (2) is returned. Ornstein now begins to copy in Europe the low-fare, short-haul activities of Southwest Airlines (2). The new CEO is quoted on the matter in the May 1997 issue of Airline Business: “We’re following Southwest in Europe and will emulate them where we can and when we can—why reinvent the wheel?”
From its bases at Brussels and Paris (CDG), the company continues to operate international and regional scheduled and charter passenger and cargo flights to Barcelona, London (LHR and LGW), Milan, Nice, Vienna, the Canary Islands, and holiday points in the Mediterranean.
In partnership with its parent, the holding company Virgin Group, and executives of Eurostar, the company begins to offer vacation packages for those wishing air and rail service for their holidays via the Channel Tunnel.
Two B-737-3M8s that Eurobelgian had earlier ordered are received in August painted in a “reversed” color scheme from those jetliners in the VAA fleet. They are the first aircraft to appear in Virgin Express colors; however, the remainder of the Eurobelgian fleet will now be painted to match them.
Virgin Express is officially launched on September 2 as the newly received Boeings provide scheduled flights over the old Eurobelgian routes linking Brussels with Rome and Madrid. Three days later, Brussels-Copenhagen service is inaugurated.
Financially troubled Air Liberte, S. A. is placed into receivership on September 26 and its chartered Douglas wide-bodies are returned to Finland. Given six months by the Creteil bankruptcy court to develop a workable reorganization plan, Chairman Belhassine promises to write a recovery program by the end of October, at which time $120-million fiscal year losses must be reported.
Following further exploration into the company’s finances during the first week of October, the Creteil bankruptcy court determines that Air Liberte, S. A.’s fiscal situation is worse than was originally reported.
Even though a number of unprofitable routes are now cut, the court announces that it must have outside acquisition bids by October 14 in order to avoid ordering the company liquidated.
Suitors for the stricken airline begin to emerge late in the week. With pressure to keep it in French hands and its unions seeking acquisition, Air France expresses interest. Under EC restrictions against acquisition of other carriers during the time of its $4-billion state bailout, it appears unlikely that the independent will join the major’s stable.
Other companies expressing an interest include AOM French Airlines, S. A., which has been seeking a merger along with British Airways, Ltd. (2), Virgin, TAT European Airlines, S. A., and Corsair, S. A., the in-house airline of France’s largest tour operator, Nouvelles Frontieres. Seeking to protect the interest of its TAT subsidiary, BA CEO Robert Ayling complains to the European Commission that AOM should not be allowed to seek ownership. It, too, is up for sale as the result restructuring plans announced in the wake of a 1995 state aid package to its parent, Credit Lyonnais.
With AOM French Airlines, S. A. and Air France out of the
Picture, two airlines, Nouvelles Frontiers, and a group of private investors submit offerings for Air Liberte, S. A. to the Creteil Court, also on October 14.
The weakest offering is made by an unnamed French pilot acting on behalf of a group of private investors; no details are provided. Virgin Express, Ltd.’s offering, for which details are also not provided, is not, as company officials put it, “fully compliant with the court’s requirements.”
Nouvelles Frontiers notes that it has partners in the Rivaud Bank and Royal Air Maroc who would be willing to take over Air Liberte, S. A. (including its $300-million debt) and make it profitable within 18 months. It would also make an offer to acquire AOM French Airlines, S. A. The two independents would be merged with its own in-house carrier, Corsair, S. A., to create a major independent airline that could then compete with Air France.
Working together, British Airways, Ltd. (2) and TAT European Airlines, S. A. agree on a three-year plan for Air Liberte, S. A. TAT Chairman/CEO Marc Rochet is tasked to manage the offering on behalf of the British major. In addition to an initial payment of $5 million for AL’s assets, the BA/TAT plan would essentially retain the present Air Liberte, S. A. fleet and routes, concluding a code-sharing agreement for routes now flown in competition and pledging not to begin new routes that overlap. French management would be maintained, 1,250 employees would be hired, and the British would make a major capital investment. The company would be reformed into the new French carrier So-ciete Nouvelle Air Liberte, S. A.
Also in October, a wet-lease agreement is entered into with Sabena Belgian World Airlines, S. A. covering nine daily return flights from Brussels to London (LHR and LGW), as well as those to Barcelona and Rome that will start later. Employing a Sabena B-737-4Y0 and two B-737-46Ms painted in Virgin Express livery, the company begins flying the Belgian line’s Brussels to London (LHR) route during the last week of the month. Frequencies will advance to 13 times a day.
When, during the month, SAS (Scandinavian Airlines System) reduces certain of its fares on its Copenhagen to Brussels route, Virgin Express files a protest with the European Commission claiming predatory pricing. In response, SAS simply lowers all of its ticket prices on the route.
At the same time, the Rivaud Bank and Nouvelles Frontiers abandon their efforts to take over Air Liberte, S. A.; Rivaud throws its support behind British Airways, Ltd. (2), with the two pledging to invest $124 million in the ailing French independent. BA would hold 70% interest with the remaining 30% stake held by Rivaud. Meanwhile, Virgin Express is joined by a number of unnamed investors in presenting an alternative to the French bankruptcy court handling the case; the court extends the deadline for its decision from October 30 to November 5.
Virgin Express does not submit a bid and on the fifth day of November the Creteil Court accepts the BA-Rivaud joint offering to acquire Air Liberte, S. A., which arrangement will become final on December 15.
During the month, the rivalry with SAS (Scandinavian Airlines System) intensifies. Virgin Express, in a promotion set to last until late March, reduces its prices on the Brussels to Copenhagen route to a point 37% below those offered by the multinational carrier.
Enplanements for the year increase 43.3% to 1,881,000. Moderate profits are generated, including $1.84 million (operating) and $880,000 (net) on revenues of $173 million (BFr 6 billion), a 30% increase.
The workforce is dramatically increased in 1997, growing 56.3% to 800. Markets visited include Barcelona, Brussels, Copenhagen, London (LHR), Madrid, Milan, Nice, and Vienna.
On behalf of Sabena Belgian World Airlines, S. A., Virgin doubles its Brussels-Barcelona services in January by taking over all five of Sabena’s daily roundtrips. Five-times-a-day replacement flights to Rome’s Fiumicino Airport commence on March 30, along with new twice-daily flights to London (LGW) flown with Sabena Avro RJ85s and B-737-229As.
By May, the company is flying 1,609 flights per month, a huge increase over the 300 per month flown at start-up. It operates 150 daily charters and scheduled services between 10 major European cities.
As the year progresses, the carrier begins losing pilots to Sabena Belgian World Airlines, S. A. and other carriers as labor relations worsen. Cockpit and cabin crews, represented by the union SETCB, protest pay and working conditions that they claim are worse than at other Belgian airlines.
On August 27, Virgin Express Flight 603 is operating a replacement service into London (LHR) from Brussels on behalf of Sabena Belgian World Airways, S. A. The B-737-229A with 29 passengers on ILS approach comes within 200 ft. horizontally and 600 ft. vertically at 2,400 ft. with British Airways, Ltd. (2) Flight 818, a departing B-757-236 with 29 aboard. Both aircraft, in cloud, respond to ATC instructions and avoid disaster, although the near miss is caused by initially faulty ATC.
In September and October, two B-737-46Ms are leased to Montreal-based Air Transat, Ltd., which will operate them on its winter charters to Florida. They are sent in the company’s red and white colors, with AT titles and a tail logo.
CCAir board member Peter Murname, a principal in Barlow Partners II, and former Mesa Air Group executive Ornstein, now Virgin Express’ president, make a $50-million offer in October for Mesa’s “United Express” operation at Denver, along with WestAir Commuter Airlines. The tender, largely unnoticed in Europe, is rejected.
The company makes an initial public offering in November, selling a percentage of its equity to the public.
Passenger boardings this year skyrocket 61.4% to 3,019,947 while operating revenues surge 38.8% to $244.82 million. With expenses up 34.1% to $234.02 million, there are large profits: $10.8 million (operating) and $7.38 million (net).
The dispute between labor and management continues into 1998. During January, it is revealed that, over the past quarter, Ornstein and his group have acquired 5.33% in “United Express.” In February, an unofficial one-day strike leads to cancellation of almost of third of the carrier’s flights.
In March, CEO Ornstein and Chief Financial Officer Swigart obtain seats on the Mesa Air Group board of directors. The two “Baby Boeings” leased in Canada return at the end of March.
At the beginning of the second quarter, Virgin Express begins to sell certain of the tickets it is unable to unload by conventional means in Internet auctions. Bids are solicited from visitors to its Web site and the undesirable tickets are sold off at an average of ?33 pounds each, which represents an unexpected ?33,000 in additional and unexpected income.
Virgin Express threatens in April to move to the U. K. to skirt Belgium’s high taxes and costly personnel benefits. At the same time, Pres-ident/CEO Ornstein becomes chairman, although he returns to the U. S. on May 1 to operate Mesa Air Group. Chief Financial Officer Swigart succeeds him as president/CEO, even though he is also vice chairman of the MAG board.
The code-sharing agreement with Sabena Belgian World Airlines, S. A. is deepened on May 17 when the two begin thrice-daily return service from Brussels to London (STN) using Virgin equipment. Simultaneously, the number of peak daily frequencies is increased to six between Brussels and Barcelona. The company now offers 34 daily departures from Brussels and low-fare scheduled services to London, Barcelona, Rome, Madrid, Milan, Nice, and Copenhagen.
On May 18, Virgin Group Chairman Branson announces that Virgin Express is close to establishing a new holiday airline, based in the U. K., to be known as Sun Air. Arrangements for lift for the new package-tour airline, to be formed in partnership with Virgin Holidays, Ltd., will be provided by Sabre Airways, Ltd. starting in 1999.
In competition with the new British Airways, Ltd. (2) in-house airline GO, Virgin Express, beginning on May 22, inaugurates deep-discount service from London (STN) to Rome. Flights from the same point commence to Milan on May 23 and Copenhagen on June 5. The company does not compete directly on any routes, but offers fares from London (STN) via Brussels to Rome, Milan, Copenhagen, Madrid, Barcelona, and Nice for ?98 pounds return, with direct flights to Brussels priced at ?78 return.
A cofounder of America West Airlines, Donald Monteath, is appointed Vice President-Operations/Chief Operating Officer on June 16, effective July 1. A week later, on July 8, the company announces that, in August, it will seek an Irish operating license (which will hopefully be received by November) in order help it avoid further crippling labor costs in Belgium. It is made clear that the carrier is not quitting Brussels, but will expand in Ireland and start “something new.”
Company officials are so pleased about the extra income generated from Internet auction ticket sales that these are continued; someone, however, forgets to specify minimum bids. In its July 31 financial section, The Irish Times reports that, as a result of this oversight, the airline has been bound to accept and accommodate a ticket offer of 39 pence for a service from Rome to Brussels. Upon completion of the flight, it is registered in the Guinness Book of World Records as having been flown with the cheapest scheduled airline ticket ever.
Costs continue to accelerate during the summer, eventually being pegged at 20% higher than in the spring. Flight staff, meanwhile, defect in larger numbers to Sabena Belgian World Airlines, S. A. The loss for the first half of the year reaches ?70,000.
The creation of Virgin Express (Ireland), Ltd. is announced on September 25. Virgin Express CEO Swigart places a former Trans World Airlines (TWA) executive in charge of the new entity and announces that twice-daily roundtrips between Shannon and London (STN) will commence in mid-December. Simultaneously, it is noted that Robert Brayton, former vice president-operations at Continental Airlines, has accepted the same post with Virgin Express.
On October 1, British Airways, Ltd. (2), in conjunction with a British newspaper, offers a 50% discount on international flights with the collection of tokens. VA immediately moves to reduce its fares to certain international destinations by the same amount, in most cases undercutting BA’s special rates. The price war between BA and VA continues through October 28.
As part of the contest, the BA low-cost division GO cuts the cost of certain fares to Rome, Bologna, Lisbon, and Milan.
Virgin Express (Ireland), Ltd. tickets go on sale at the introductory one-way price of ?17 for twice-daily service between Shannon and London (STN). At this point, Brian Beal, chairman of the unborn airline’s small Shannon-based rival AB Airlines, Ltd., accuses Richard Branson, Virgin Group chairman, of “doing a British Airways.” Beal, who appeals the Virgin move to the European Commission, is concerned that it may be forced to pull out of services between the West of Ireland airport and Stansted and accuses his fellow airline boss of doing “exactly what Virgin accuses British Airways of.”
According to the London Daily Mail on November 13, Virgin Express reports losses of ?2.4 million during the third quarter, which must be added to first-half losses of ?70,000. The carrier has been struck by higher costs, up 51%, and a shortage of flight staff, many of who are defecting to Sabena Belgian World Airlines, S. A.
Recruitment is begun in November for 250 reservations agents for the new Virgin Sun package tour business to be launched in the spring.
In a grand ceremony presided over by Chairman Branson, Presi-dent/CEO Swigart, and Luzveminda O’Sullivan, the 1998 Rose of Tralee, the company’s new Shannon headquarters are opened on December 15. The proceedings include the arrival of the first B-737-300 that will be stationed at the Irish airport.
Flights between Shannon and London (Stansted) begin on December 18.
Enplanements jump 17.7% to 3,554,825. Revenues climb 14.1% to $277.08 million, while costs are up 18.9% to $276 million. There is an operating profit of $1.08 million and a net gain of just $688,000.
An announcement is made on January 29, 1999 that the company will inaugurate twice-daily return flights from London (STN) to Shannon on December 1.
With the beginning of the summer schedule on March 28, the company introduces thrice-daily RJ85 return flights on behalf of Sabena Belgian World Airlines, S. A. between Brussels and the Channel Island of Jersey.
On April 13, shareholders approve a plan for the company to repurchase up to $15 million of its outstanding shares.
On May 1, the new Virgin Sun Air, Ltd. holiday charter carrier takes wing; lift is provided employing a pair of A320-214s subleased from Sabre Airways, Ltd. Revenue charters are operated from London (GTW) and Manchester to Mediterranean and European holiday destinations.
While taking off from Brussels on July 13, a tire bursts aboard a B-737-4Y0. After circling the airport for three hours to burn off fuel, the aircraft makes a safe emergency landing during which no injuries occur.
Aviation Week and Space Technology reports on August 23 that Virgin Express will launch Berlin Express operations on November 10, employing the company’s Irish-registered “Baby Boeing,” to offer nonstop services from London (STN) to one of the three airports at the German capital, plus Brussels and Paris (CDG).
Virgin Express announces on October 5 that it has no further interest in acquiring any of the assets of newly defunct Debonair Airways, Ltd. The charter base at Paris (CDG) is closed.
With the end of the summer season in late October, the carrier and Sabena Belgian World Airlines, S. A. halt their dual-designator service between Brussels and London (LGW), freeing the Sabena B-737-329 employed for the routes the two code-share from Brussels to Barcelona and Rome. The two partners continue to offer code-shared flights from Brussels to London (LHR) nine times weekdays, with a reduced number of flights on weekends.
On November 10, Virgin Express replaces defunct AB Airlines, Ltd. on the route from London (LGW) to Berlin (Schoenfeld), twice daily. These are the only nonstop flights from London to the German capital from the U. K., save those offered by British Airways, Ltd. (2).
Passenger boardings jump 12.6% to 2,925,000. Revenues climb 11.9% to $291.8 million, while costs are up 15.1% to $299.2 million. The previous year’s slight profits are now losses: $7.4 million (operating) and $5.64 million (net). The net loss is blamed on compensation to former management and a share buyback scheme.
Airline employment at the beginning of 2000 stands at 972, a 36.5% increase over the previous 12 months. The B-737 fleet includes 2 Dash-3M8s (1 of which is leased to Virgin Express Ireland, Ltd.), 3 Dash-33As, 2 Dash-3Y0s, 4 Dash-36Ns (2 of which are chartered to Virgin Express Ireland, Ltd.), 2 each Dash-4Y0s, Dash-46Ms, and Dash-405s, and 1 Dash-430.
With the company plagued by management and quality difficulties, Sir Richard Branson confides to the Financial Times in early February that it was a mistake for him to have purchased the carrier and now wishes that he had just started a new airline instead.
On February 15, an agreement is reached with City Bird, S. A. under which City Bird will take over all Virgin charters as of October 1.
Recovery plans are put into place during the first quarter. Flights between Madrid and Rome and Rome and Barcelona are cut and capacity dedicated to increasing routes elsewhere. Additionally, the company’s charter operation, which accounts for a third of its revenues, is to be downsized because it is both unprofitable and difficult to manage.
The company’s first quarter loss grows to E 13.8 million ($13.2 million) compared to E 5.1 million for the same period a year earlier. Although revenues have grown by 10.5% to E 59.8 million, costs, led by increased fuel prices, are up 23%.
Return frequencies from Brussels to Copenhagen are expanded on May 1 from one to three flights daily and to London (LHR) from seven to eight.
Service from Brussels to London’s Stansted Airport is discontinued on May 3; flights into Gatwick and Heathrow Airports are continued. Beginning on May 4, anyone with the surname Ryan is allowed to fly free (along with a friend) on the company’s new frequency between Shannon and London (LGW) through May 14; although the service is designed to compete with the twice-daily roundtrips between the two points made by City Flyer Express, Ltd., the promotion is perceived as a slap by competing Ryanair, Ltd., which institutes a similar offer, running until May 24 on its Shannon to London (STN) service.
On May 26, a press release notes that the carrier will cease its charter operations in October in order to provide capacity for the company’s more profitable scheduled services. At the end of the month, the unprofitable routes from Rome to both Madrid and Barcelona are closed.
The first Virgin Blue, Ltd. aircraft is a Virgin Express Ireland, Ltd. B-737-33Q sent down from Brussels via Istanbul and Muscat, on May 30-June 1. A B-737-3M8 arrives in Australia under charter from Virgin Express in late June.
During June, arrangements are completed with GECAS for the lease of eight Next Generation B-737-700s beginning in July 2001 and with ILFC for the charter of three more starting in 2002.
The carrier reports an E 6.4-million loss for the second quarter. Company executives believe that the airline’s current distribution system is not properly filling its aircraft and consequently, negotiations are opened with reservations system providers Galileo and AMADEUS regarding an upgrade of its sales and marketing network.
In accordance with a new game plan released in mid-September, the carrier, on October 28, reduces its charter operations from 23% of its operation to just 2%-3%, with those being ad hoc. Operations from London (STN) are halted and the company’s remaining services are consolidated at Gatwick and Heathrow Airports. In addition to nine daily roundtrips between London (LHR) and Brussels, three new daily return frequencies are introduced to the Belgian capital from London (LGW). Return flights from Gatwick to Shannon, Ireland, are doubled from one to two every weekday.
Following the report of a third-quarter E 7.3-million ($6.2-million) loss at the beginning of November, Managing Director John Osborne resigns to become group operations director at Ryanair, Ltd. and is succeeded by Flight Operations Director Neil Burrows. David Hoare becomes executive chairman. In continuing financial difficulty, the carrier on November 10 cancels its 2 orders for 11 Next Generation B-737-700s and 2 Next Generation B-737-800s, which were to have been delivered between July 2001 and April 2003. It also cuts its current B-737-300/400 fleet by returning a B-737-341 to its lessor, VARIG Brazilian Airlines (Viacao Aerea Rio Grandense, S. A.), and subleasing five others to Virgin Blue (Pty.), Ltd. .
It is reported on November 28 that Virgin Blue, Ltd. will receive two more B-737s within days and six more in 2001. Indeed, a Virgin Express B-737-46M is received under lease at Sydney the same day, with the second, a Dash-4Y0, arriving on December 2.
Daily B-737-300 roundtrips are inaugurated on December 10 between Brussels and Malaga. The new flights complement the carrier’s twice-daily nonstop return service from the Belgian capital to Madrid and its seven dailies down to Barcelona and back.
It is reported on December 12 that Virgin Express (Ireland), Ltd. will be shut down on January 15 and put up for sale. On that date, the
Irish subsidiary’s Berlin, London (LGW), and Shannon bases will be closed down and necessary assets transferred to Brussels. The move follows a strategic review that finds it necessary for Virgin Express to refocus business around the profitable routes out of Brussels.
Enplanements for the year total 3,814,689. Due largely to the strength of the U. S. dollar and high fuel price, the year’s net loss deepens to ?65.3 million ($57.5 million).
In actuality, the Irish subsidiary will, due to requests from potential purchasers seeking a smooth transition, be allowed to fly from Shannon to London (LGW) and Brussels until at least March 15. When no takeover is completed, Virgin Express (Ireland), Ltd. will be shut down on March 16.
VIRGIN EXPRESS FRANCE, S. A.: BP 10928, 1 Rue de La Haye, Le Dome, Roissy Cedex, Paris, F-95731, France; Phone 33 (1) 4816 1500; Fax 33 (1) 4816 1506; Http://www. virgin-express. com; Code DG; Year Founded 1997. Air Provence International, S. A., the subsidiary of EuroBelgian Airlines, S. A., is acquired with its parent by Virgin Group in April 1996. The company is allowed to continue its previous scheduled flights under its own name until November 1997, when it stands down.
In the months that follow, the company is reformed, renamed, and even listed on the Nasdaq and Brussels stock exchanges. Jean-Pierre Rozan remains president, with Harve Tourrei as vice president-operations. A fleet is assembled comprising 1 Boeing 737-300,2 British Aerospace BAe 748-2As, and 3 Grumman Gulfstream G-1 turboprops.
Revenue flight operations resume on March 24, 1998 from Paris (CDG), as well as a hub at Nice. Scheduled departures are offered to London, Copenhagen, Brussels, Milan, Rome, Barcelona, and Madrid. In addition, charters are offered to over 150 different destinations in Europe, the Mideast, and Africa.
With the Air France division Air Charter pulling out of North Africa in the fall, greater emphasis is placed on VEF’s nonscheduled flights from Paris (CDG).
Airline employment stands at 70 at the beginning of 1999. Paul Skelion is now president, with Herve Tourral as director of flight operationns.
World History
