Tom Maynard joined Virgin Atlantic in July 2021, having
previously worked at BCD Travel’s consulting division, Advito. Prior to that he
spent seven years in the global travel team at McKinsey & Company, while
his 20-plus years in the travel industry have also included roles at CWT and
bmi.
Starting a new job is rarely without its challenges, but joining a company in its darkest days with little idea of when business might pick up, and when your customers’ all-important historic buying behaviour has been rendered more or less irrelevant…. well, that’s no small undertaking.
“It’s certainly been an interesting time but things are looking more positive every day now,” says Tom Maynard, who commenced his role as head of corporate sales UK and Europe at Virgin Atlantic in July this year.
Maynard brings a well-rounded business travel background to the position, including stints with TMCs, consultancies and as a travel manager at McKinsey where he managed $500 million in air spend.
In his three months at Virgin Atlantic to date, he has seen the airline’s network flex and regrow as international travel restrictions relax; witnessed SMEs leading business travel recovery; and observed some changing buying habits.
When it comes to negotiating airline rates, however, most corporates are happy to extend their existing deals.
“If someone comes and asks us for a six or 12-month extension right now we’ll go with that. Going out to RFP right now… what are you doing it on? You can’t come to us with your 2019 volumes – they’re going to be very different now,” said Maynard.
“We also don’t know about new travel patterns. Your business may have changed in terms of where its offices are, who’s travelling, what level of travel you’ve got coming back. An extension is the most pragmatic way of going about this.”
Market share deals
With little meaningful data to show for themselves, those corporates that do draw up a chair at the negotiating table are finding that market share-related deals – rather than volume-based discounts – are airlines’ current preference, and Virgin is no different.
Maynard explained: “Probably more of our targets have been on market share anyway. That’s more to do with our position out of the UK where we can really fight for share. Going forward we have no idea what [corporates’] volumes are going to be so share is going to be the more relevant target, at least through this year and next. We might have a different conversation about revenue in 2023. But share is a good benchmark for any carrier to have. It’s a good measure of contract performance.”
Virgin uses Prism to monitor corporates’ share, a platform from which Lufthansa Group airlines recently withdrew to the joy of German travel management association VDR, which has long criticised it on the grounds of data protection and competition laws.
Virgin has no plans to make a similar exit, said Maynard, but pointed to a range of similar tools. “As with any software there’s alternatives out there and we’re assessing with our JV partners the direction we want to go with this. All carriers are probably looking at which is the best model, which provides us with the best solution, and which is the most cost attractive.”
Maynard also rules out the introduction of a dedicated corporate portal, a step British Airways recently took – with mixed reactions from the corporate travel community.
“Being very honest, with the level of investment to do that right now, it’s not at the forefront of our thinking,” said Maynard. “Yes, we absolutely want to engage with our corporate customers and trade customers and we’ll continue to do that face to face where possible. There’s a place for a corporate portal and never say never, but it’s not something on our agenda right now. I don’t want to upset the apple cart. We need to work with our partners. The recovery is fragile at the moment in the corporate space. We need to be fighting for every seat and we’ll do that in cooperation with our trade partners.”
He again emphasises partnership when asked if Virgin is behind the curve with its NDC developments.
“I think that’s fair to say,” he said. “Our approach to NDC is that we’ll always be an omnichannel airline. We have to engage with all distribution options out there. NDC is absolutely on our roadmap but we also need to make sure it’s fit for purpose and that you can do all the things you can currently do in the GDS – make your changes, your modifications... all those types of things.
“We’re clearly working on it but it’s something we’ll do with the trade. We’ll always be an omnichannel airline and we’re not going to change that stance. We need to work in partnership with our corporate customers and we need to make sure we’re not excluding channels from our business mix.”
Recovery and evolution
Like many travel suppliers, the airline has seen small and medium-sized companies returning to the skies more swiftly than their larger counterparts. Maynard attributes this not only to “fewer barriers to travel and less bureaucracy” but also to a greater need to engage with their customers.
It’s too early to draw conclusions about changing buying habits, however: “We’re not really seeing the volumes from what I would call traditional corporates come back yet to a level that really lets us make any judgement calls. Some are uplifting their policies into Upper Class and some are downgrading into premium economy – it’s a real mixture.”
Premium economy fares sold particularly well following announcements from the US about the easing of transatlantic travel restrictions but that, says Maynard, is partly down to leisure travellers with “more discretionary income than they had going into Covid and now wanting to treat themselves having not been away for 18 months or two years”.
TMC and corporate business have traditionally contributed around 40 per cent of the airline’s overall revenues, with Upper Class bookings comprising more than two-thirds of those business sales, said Maynard. “Upper Class is still 70 per cent of our revenue from TMCs but that’s off a very low base at the moment. The good news is volumes from TMCs have doubled.”
Forward thinking
Corporate bookings have plateaued since the initial surge that followed news of the US reopening to UK and EU citizens, but as we approach the traditional seven to 14-day advance booking window ahead of the 8 November restart, the airline is expecting substantial growth.
Activity beyond that is anyone’s guess. Business travel to and from the US typically falls away towards Thanksgiving at the end of November and the lull typically continues until Christmas and into early January.
“Do we expect to see that this year? Probably not, because if we’ve only had a couple of weeks of travel before Thanksgiving then people are also going to use December to travel too. Any of the forecasting we’ve done in the past… I’d be hard-pressed to say we’ll be following it this year,” said Maynard.
He does however buy into the school of thought that believes there will be fewer but potentially longer business trips in the future as a result of concerns around both the monetary and environmental cost of air travel.
“Yes, we may see the effects from the [cutting of] internal meetings side of things. Instead of travelling quarterly to meet with colleagues it might be twice yearly in person. But when you go for client-facing travel you might actually go for longer – you might consolidate three trips into one and stay a week instead.”
Maynard continued: “We haven’t seen that in the data yet – we’re still seeing out Monday or Tuesday and back Thursday – but that model may change as we start seeing a ramp-up and that volume come back. In the RFPs that we have responded to, sustainability questions have become a lot more detailed. It’s much higher up the agenda now.”
Pricing outlook
Despite all the unknowns, Maynard expects relatively stable pricing in the year ahead. Balancing supply – its network capacity – with demand will be key to that stability, and the airline is anticipating corporate business will be down 30 per cent on pre-Covid volumes in 2022 and 20 per cent down in 2023.
“At the end of the day we have to remain competitive and the North Atlantic is still an incredibly competitive landscape,” said Maynard. “We’ve got new entrants in the market who are challenging us all both from a product and pricing perspective so I’m not expecting huge increases in pricing over the next six to 12 months. Also, we want to encourage demand – we don’t want to stifle it by pricing ourselves out of business.”
The airline’s route network capacity, which at the time of writing is around 65 per cent of 2019 levels, will be brought back carefully to match demand. To begin with, that has meant focussing on routes that have a “nice blend of passengers” – corporate, leisure and premium leisure.
“If you look at the network coming back, all the routes have a blend of those three,” said Maynard. “We need every flight to be cash positive. There are routes in our network that historically have been predominantly corporate – look at Washington DC or Seattle, to a certain degree. For those the restart has been delayed because we don’t have that blended approach around what’s going to fill the seats. There are plans to bring those back in the first quarter of next year but if we need to suddenly change that up because we’re seeing tech firms flying in and out of Seattle, for example, then we have the flexibility to do that.”