VIRGIN TAKES OFF AT HOME

Richard Branson and Virgin have somewhat hijacked the news over the last two weeks, haven’t they?

It started with Virgin being outbid by FirstGroup for the West Coast Mainline franchise that it has been running for the last 12 years. You can read our blog post with the details of FirstGroup’s bid here. Branson, it was reported, was livid, issuing an aggressive statement questioning the Government’s decision and FirstGroup’s competence almost immediately. This was followed by the announcement of an appeal and the launch of an online petition, which garnered 150,000 signatures. Branson even offered to run the service on a not-for-profit basis if the Government agreed to postpone the contract signing for two months.

Yesterday (28 August 2012) it was reported that Virgin had its lawyers working over the Bank Holiday weekend and is now planning a last minute legal challenge to prevent the Government from signing the contract, which is due to happen tomorrow and, which, according to the Transport Secretary Justine Keeling, is going ahead.

It’s all very gung-ho for the transport industry and I’m genuinely looking forward to the outcome. But what I find really interesting is the surprise announcement – released in the midst of this melee -that Virgin is proposing a three-times-daily airline service from London Heathrow to Manchester from next March.

When it was announced, many assumed Branson was simply throwing his toys out of the pram having lost West Coast Mainline. But I doubt this very much. I think the domestic airline has been part of the Virgin plan for some time and the timing of the announcement was merely coincidental.

The airline lost £80.2m last year. It has also lost its code share deal with BMI following BMI’s acquisition by IAG and its alignment with BA, which means it’s lost a significant chunk of its feeder routes, so something had to be done. And that something, it would seem, is the launch of a UK domestic network.

My question is: “Does this signal more of a strategic change in direction for Virgin Altantic, or will the IAG competition trustees charged with reallocating the BMI Heathrow slots see it as nothing more than smoke and mirrors to make them look like more of a credible option for those slots?”

The trustees will award these slots from summer 2013 and the decision will be made in the next couple of months, which also makes me think twice about the timing of the announcement.

Whatever the reason, though, the move by Virgin is potentially good news for the corporate travel buyer, as the likes of Virgin and BA start competing on value, service and price leading to increased frequencies and flight options, as well as better value for money.

David Chapple is event director of the Business Travel Show – you can challenge him on Twitter @btshowlondon or at david@businesstravelshow.com  

FARE HIKES AND FIRSTGROUP FRANCHISES - WHAT DOES THIS ALL MEAN FOR BUSINESS TRAVEL?

All eyes were on the rail industry this week following two massive announcements, starting with a proposed 6.2% increase in rail fares and followed by the news that Virgin Trains has lost its West Coast main line operating contract, which it had held since 1997, after being outbid by FirstGroup. FirstGroup is the UK’s largest train operator and it is believed to have bid as much around £5.5bn for the rail franchise.

The company, under the name First West Coast Limited, will take over the franchise from 9 December and is due to operate the service until 2026. The West Coast main line is a lucrative business proposition, having experienced a surge in passenger numbers from 13m to 31m in the last 15 years.

FirstGroup says it will introduce 11 new 125mph six-car electric trains on the Birmingham-to-Glasgow route and provide more direct services between destinations. It’s also promised to add a further 40,000 seats a day on West Coast routes from 2016.

But what does all this mean for the business traveller and business travel buyer? After all, Virgin Trains has done an excellent job of attracting and retaining business travel customers during its 15-year West Coast reign.

If FirstGroup keeps its promises and really does increase direct services and capacity, then this is only good news for the business traveller reducing both journey times and disruptions. And, as FirstGroup owns a substantial chunk of the UK rail network then maybe, just maybe, there will be an opportunity for business travel buyers to negotiate volume discounts for the first time, which may well help to offset those rather steep fare increases.

Of course, it’s very early days, but let’s hope that FirstGroup bears the business traveller in mind when rolling out its franchise strategy in a few months time.

David Chapple is event director of the Business Travel Show. Commuting to central London from the Home Counties each day, he’s a bit of an expert on rail travel. Challenge him on Twitter @btshowlondon. 

TRAVEL AND MEETINGS CONVERGENCE - MYTH OR REALITY? PART 2

My colleague Katy Phelps wrote the prequel to this blog - Travel and Meetings Convergence, Myth or Reality? Part 1 – you can find it here. In her blog, she spoke about the convergence between the worlds of the corporate travel buyer and the corporate meetings buyer and how, on the whole, this crossover was a myth. And it’s true, the cross over is small, especially when it comes to trade shows, but crossover there is.

There are two areas where I believe it is most apparent. The first is at the strategic procurement level (ie where large multinational organisations are spending a lot of money and big savings are to be had). The second is the booking of spaces for regular small meetings (where only the tiniest of margins exist and minimum savings can be made).

Strategic procurement in the meetings industry – also known as strategic meetings management – is mostly the domain of large multinational organisations that have the buying power to procure meetings services in the way they procure business travel. These organisations often have procurement managers that deal with meetings and travel whereas in other, smaller companies, it’s not necessarily seen as a procurement function.    

These category specialists are responsible for agreeing the terms of contract with two or three suppliers in every category – from AV, production and creative, to venues, delegates and, of course, travel. They also look after their organisation’s large meetings. Their purpose is not to coordinate the creative elements of travel and meetings (which is best left to the event managers) but rather to consolidate the procurement of these functions and their suppliers. Do this well and considerable costs can be cut.

The other area where there is crossover between travel and meetings is in the procurement of high volumes of small meeting spaces by an organisation for, for example, sales meetings, training sessions, board meetings. In recent years, this function has increasingly become the responsibility of business travel managers who are able to draw on their experience and knowledge of consolidating large volumes of travel to transfer these procurement skills to the meetings category. Procurement managers are driving this consolidation of meetings spend because it gives them increased buying power, which leads to cost savings.

And so, in my opinion, the convergence between travel and meetings is very definitely a reality; it’s just that it’s a reality that is limited to certain job functions and it’s the business travel managers who are taking on meetings management but not vice versa. This is why at Centaur we have unique exhibitions for each industry and why, at TheMeetings Show UK, you’ll find no business travel content, but at the BusinessTravel Show you will find meetings management suppliers and educations sessions dedicated to meetings management and procurement in the conference programme.

David Chapple is event director of the Business Travel Show. Contact him on Twitter @btshowlondon or on 020 7970 4072.