Virgin Atlantic abandons Heathrow’s third runway and returns to Gatwick

Airline to grow revenue by 20pc after emerging from Covid ‘valley’ of death

Virgin Atlantic, owned by Sir Richard Branson, is considering a return to Gatwick as well as flights from regional airports like Bristol. Virgin Atlantic has given up on the third runway at Heathrow being built before the end decade.

Shai Weiss, the chief executive of Virgin Holidays, said that the company was looking at expanding the Virgin Holidays division and adding more flights to the secondary hub of the carrier in Manchester as part of their plans for growth from 2025 to 2030.

According to Mr Weiss, the blueprint, which is not yet public, but internally known as VX30 will be aimed at increasing revenues by 20pc over the £3.5bn that was expected for this year.

He said: “I believe we’ve got a rule out the third runway. This leaves us with either the acquisition slots at Heathrow, or flights from Gatwick or secondary cities in UK.”

Virgin’s Heathrow main base is the best option for growth because of its high margins and the better connectivity it offers between flights. However, the new plan assumes that the scope will be limited.

Heathrow operates at almost full capacity and put the plans for a new runway on hold when Covid was underway. The project had already been facing new political and legal obstacles, and is yet to revive them.

Willie Walsh is the former British Airways chief who leads Iata, a trade association for the airline industry. He said last week that it may not be possible to build a new runway at Europe’s busiest airport hub.

Virgin will continue to search for available slots at Heathrow, but only on a sporadic basis, said Mr Weiss. In the last two years it has acquired five daily pairs, including slots bought from KLM as well as others that were seized and reallocated from Russia’s Aeroflot.

He said: “We have purchased and picked up slots. But it is a very limited pool. It’s also expensive. It’s also unpredictable, because you need to depend on slots becoming available.

Virgin has a few slots that are currently unoccupied after the Hamas attack. They will be used when Tel Aviv flights return in September.

Mr Weiss stated that he will continue to push Heathrow into agreeing to Virgin’s plans for a dedicated terminal at Heathrow.

This facility will be similar to British Airways’ Terminal 5 operation and shared with Delta’s and Virgin’s partners within the SkyTeam alliance.

Virgin may return to Gatwick if it decides to look beyond Heathrow.

The airline operated at the airport until 2020 when it left during Covid. Stewart Wingate Gatwick chief executive told The Telegraph in early October that he would be happy to welcome Virgin back at the earliest possible opportunity.

Virgin still owns operating slots at Gatwick, under an agreement called a babysitting arrangement with EasyJet. This allows Virgin to reclaim the positions.

Mr Weiss stated that a return to the airport would be a long-term option, but it was not something that could be taken lightly. The airport is no closer to being reopened.

Virgin’s chief executive spoke during a flight from Manchester to Las Vegas where the company celebrates its 40th birthday with the launch services to the gambling mecca.

According to Mr Weiss, Manchester will be getting one or two new routes a year as part of the airline’s growth plan. Flights may also begin in Bristol. Virgin’s other UK base, Edinburgh, is the only one. However, there is still a possibility that flights to Glasgow and Belfast could be resumed.

Virgin wants to lease additional aircraft in order to increase its fleet size beyond the 45 planes it will have when the last A350 from its current order book arrives.

Mr Weiss said that the VelocityX plan was designed to stabilize the airline, after its near-collapse during Covid.

He said: “We have been through the valley and come out on the other side.”

Virgin is on track to achieve record revenues this year. Mr Weiss also said that Virgin will return to a profit-positive operating result this year. As a result, the airline will not be able to make a profit due to the costs of servicing debts of £1.5bn accumulated during Covid.

This burden could be reduced by the company raising new equity to pay off debt. This would dilute the shares of Delta Air Lines and Sir Richard, which is not an attractive option, according to Mr Weiss.

Weiss stated: “Our investors like the way we are.” It is our job as managers to generate cash to pay off debt, and to strengthen the balance sheet.

VX30 is likely to include an expansion of Virgin Atlantic Holidays, which generates 20% of revenues, as the business helps Virgin fill planes.

The Virgin Flying Club, Virgin Red Rewards Club and other collaborations will be a focus of future efforts.