Airports keep Virgin’s ambitions grounded

Date: 05/06/1997

By Leyla Linton

“THEY have deregulated aviation, but there are so many vestiges of the regulated environment that it is almost as if it did not happen.”

So says Jonathan Ornstein, chairman and chief executive officer of Virgin Express, who is exasperated with the way the European single market in aviation is not working. The genial American is flabbergasted and outraged at the problems the low-cost, no-frills airline has faced since it started operating last April.

The ambition of Virgin Express' owner, billionaire entrepreneur Richard Branson, was to emulate the success of Southwest Airlines, which became the cheapest carrier in the United States thanks in part to cheap maintenance and groundhandling.

But on this side of the Atlantic, Ornstein has been forced to use the European airports' own groundhandling operations and cannot contain his frustration at what he claims are their high costs and inefficiency both in Brussels and elsewhere, which he blames for many of his passengers' complaints.

“I get calls saying, 'You guys are doing a bad job.' I say, 'Whooaa, thank you social Europe. We would love to have our own people there. We would love to do our own handling. We are not allowed to'.”

If Virgin Express could have groundhandling at market costs in Zaventem, Ornstein estimates this would save between 10&percent; and 20&percent; on its average fares.

He is also unhappy with the way the airport authorities assign gates and suggested he could double the number of planes moving in and out of them. The authorities turned him down flat. “They want to keep total control. They want

to take the management of the airline away from the airline and keep it for themselves. It is just a huge amount of bureaucracy,” he says.

Virgin Express was told it could not use its own boarding machines at Zaventem because that would mean putting them on the counters and the counters belonged to the airport. So Ornstein suggested portable printers, using microwave technology. That too was forbidden: the airport owned the air waves.

“I did not expect that they would be so successful in stymieing us. They have got it off pat on how to slow us down. Why? It prevents competition. It is very politically charged,” he claims.

Despite all the problems, Ornstein is determined to keep the airline's scheduled services at Zaventem, although he would consider moving its charters to Charleroi or Antwerp.

Slot allocation has also given Ornstein a headache. He was astonished to discover that the slot coordinators at all the airports were employees of national carriers and that, moreover, they failed to see why there might be a problem.

The European Commission is on the side of Virgin Express, according to Ornstein, but faces the same resistance. “The EU thinks it is terrible too, but it just gets stonewalled. We wanted a slot in Frankfurt when Delta pulled out. It was totally denied. Where did those slots go? I have no idea,” he says.

It was the need to acquire slots that forced Virgin Express to 'get into bed' with Sabena, its Belgian competitor, just six months after it started operating.

“I had no choice, otherwise I would be doing this for ten years and hopefully trying to get a slot every now and then. In that respect it was a terrific deal. There was no way we were going to get access to Heathrow. None. Zero. Zip. Impossible!”

Ornstein acknowledges that people were worried that the code-sharing move would undermine what little competition there was on Brussels routes, but says that their fears have proved groundless as capacity has increased and fares plummeted.

He adds: “We have a tendency to want to raise the fares because the loads are so good, but we have not done that. Our fares are exactly the same as they were a year ago.”

Virgin Express is considering expanding within Scandinavia and in southern Europe. In five years' time it may have 40 aeroplanes instead of 25, and another hub organisation.

But Ornstein still has his feet firmly on the ground. The detail is all important, he says, and without it, global strategy is worthless. Service is key. To illustrate his point, he takes me to his window to show me a tree with a plastic bag stuck in its branches.

“You see this tree right here. You see that trash up there. It has been there for months, since before the tree got leaves. I have talked to the cleaning company every week for months. In the US, they would have had it down in a day.”