In 2016, Britain voted to split up from the European Union through a nationwide referendum process. The government started the legal procedures of withdrawal on Wednesday. The goal is to depart from UE by March 31st, 2019. This unprecedented political event is known as Brexit. Richard Branson, the founder of Virgin Atlantic, connected this phenomenon with a future financial loss for business leaders.
The Financial Loss Is Estimated at 50 Million Pounds
On Tuesday, Virgin Atlantic Ltd. announced hard times ahead. The British airline that set to conquer the space tourism for the first time in history sees in Brexit a bad omen for its business. The Chief Executive at Virgin Atlantic, Craig Kreeger, estimated the financial loss at around 50 million pounds.
These expectations precede the release of the 2016 report for the company. Last year, the carrier had a 2% increase to 23 million pounds in underlying pretax profit. However, the target revenue was initially much higher than this.
Soon after the Brexit referendum, the sterling pound saw a major drop in value. This impacted Virgin Atlantic heavily. Most of the target clients of the airline are U.K. citizens. Thus, even though the country hasn’t even left the European Union yet, Virgin Atlantic started to feel the impact of this political move on its revenue and profits as soon as 2016.
Virgin Atlantic Will Refocus on Other Markets
Virgin Atlantic is a project split between Virgin Group owned by Richard Branson which has 51% of the shares and Delta Air Lines that has the rest of 49%. In light of recent events, it is now more expensive for British people to travel abroad. As a consequence, Virgin Atlantic redirected its marketing focus on other markets. These are Hong Kong, China, and the United States. However, the board feels that this strategy might not be powerful enough to save the company from the side effects of Brexit.
Moreover, the carrier is facing a stronger competition that builds an incredible reputation on low-cost offers. Norwegian Air Shuttle, Wow Air, and Westjet are reinforcing their transatlantic routes. This business format is similar to the one envisioned by Virgin Atlantic. All these airlines contributed to the increase in the number of available seats by 6%. By comparison, Richard Branson’s company increased this segment in 2016 by 2% only. Despite all these, the British company has no intention to lower its prices for its long haul routes.
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