After a slump and a court case the Virgin airline boss is ready for more

Virgin Atlantic boss Steve Ridgway is still dealing with the fallout from the collapse of a price-fixing trial involving his airline.

Despite not actually facing any charges, his firm, which has always styled itself as the people’s champion, was battered and bruised by the Office of Fair Trading (OFT) case, which alleged collusion between Virgin and British Airways (BA) over long-haul surcharges.

It was also a personal humiliation for Ridgway, who was forced to release a statement saying that he knew what his airline was up to.

He admitted at the time: “Although I did not have any direct contact with BA in relation to passenger fuel surcharges, I regret that, on becoming aware of the discussions, I did not take steps to stop them,” adding: “I apologise unreservedly for my involvement in this case.”

Today, as he sits on a long curved sofa in a beautifully cut dark blue suit in Virgin’s upper class check-in lounge, he defends his position.

Did he give the OFT all the help he could to prosecute the case, given that the firm received full immunity in return?

“We did cooperate with the OFT,” he says. “That was certainly the case.”

Despite admitting his knowledge of a price fixing scandal the board did not ask him to resign. Was he surprised by that?

“My involvement was fully investigated by the board and they expressed their full confidence in me,” he says.

Critics say that lower level executives were brought to court, while directors at the top, like him, escaped charges.

“There is not that much I can say on that because the OFT is reviewing the case,” he says.
Ridgway, who is acknowledged in the industry as an excellent marketeer, has worked for Virgin since 1989, taking over as chief executive in 2001. He has a close relationship with owner Sir Richard Branson, which goes back to the 1980s, when Ridgway, a former boatbuilder, was the project manager overseeing the billionaire’s Virgin Challenger attempts to break the Atlantic-by-boat record.
Detractors say it was this close relationship with Branson, who has a 51 per cent stake in the airline, that kept Ridgway his job.

“My involvement was discussed as a board matter,” he says. “And it was handled collectively by this group.”

In some respects, Ridgeway has had to deal more with the fallout of the case than the four men – three former BA executives and one current employee – who found themselves in the dock.
For Martin George (former current commercial director), Iain Burns (former head of communications), Alan Burnett (who led sales in the UK and Ireland) and Andrew Crawley (the airline’s current sales and marketing director), the end of the case was a chance to rebuild their reputations after spending the last four years under investigation
Walking away from Southwark Crown Court was a fresh start for them. For Virgin – and Ridgway – it simply opened up even more questions.
The BA quartet was charged after Virgin blew the whistle on the alleged arrangement, and agreed to cooperate with the OFT in exchange for immunity from prosecution.
However, the trial collapsed when 70,000 emails from Virgin’s database were recovered, some of which, defence lawyers argued, contradicted the OFT’s line of collusion between the two airlines.

The OFT, which had spent around £1.6m bringing the case to court, knew it could not analyse all this new information while prosecuting a case at the same time and was forced to end the trial.

A humiliated OFT said at the time it would be “reviewing the role played by Virgin Atlantic and its advisers in light of the airline’s obligations to provide the OFT with continuous and compete cooperation”.

For
its part BA, which had agreed to pay £121.5m to the OFT as part of a civil case over the matter, now says it will consider fighting this payment, further muddying the waters.

The OFT will not comment on what stage its review has reached. But while Ridgway awaits its findings, he still has a company to run.

And as always there is much to do in the airline business. Fewer industries feel the pain of a recession more keenly than this sector which relies on large amounts of discretionary business and consumer cash.

Virgin swung to a full-year pre-tax operating loss of £132m last month, compared to a £60m profit in 2009. Sales also fell 8.6 per cent to £2.35bn.

Ridgway, more comfortable now, says: “Last year was a pretty incredible year. But to a degree we saw some of this coming. From as far out as 2006 we slowed down the delivery of new aircraft. More recently we have shut down routes, and people have left. The business has shrunk by 20 per cent.”

The 38-strong long-haul fleet employs 7,500 staff, 10 per cent fewer than a year ago. It has also cut back on the frequencies it flies to New York, Chicago, and Hong Kong, and it has cut its Mauritius route in favour of a new route to Accra, Ghana, which opened this year.

But the airline says the first quarter of the current financial year was encouraging, with sales rising 10 per cent on a year ago. Ridgway says: “Passenger loads continue to improve and we are seeing yields recover. The summer is looking good. We will know by November how good our year will be.”

The airline boss is also in talks with his pilots in a bid to avoid the first strike in the airline’s history over changes to the amount of days off it allows them.

Virgin will also have to deal with BA, which despite its own ongoing dispute with its cabin crew, has finally secured European and US approval for a tie-up with American Airlines, as well as closing in on its merger with Iberia.

Virgin has always fought these deals, which it says will give BA the power to set ticket prices for the overall transatlantic market.

Ridgway says: “We fought this for 14 years and we feel it is iniquitous that it went through. The competition authorities should have made BA and American Airlines sell some of their Heathrow slots, rather than just leasing them to rivals. The playing field has been unfairly tilted.”

Virgin and Aer Lingus are the only two major airlines that are not in one of the three large airlines alliances – Star Alliance, SkyTeam and Oneworld. Will the fragile state of the industry and a growing BA force it into one of these groups?

“Virgin has always been independent,” says Ridgway. “We have a strong and distinctive place in the market that we have built up over the years. One day we might join an alliance, but we don’t currently need to. And if we do so it will be from a position of strength.”


However, Virgin has long sought a closer tie-up or a merger with British rival BMI, which has a large short-haul network it says will compliment its long-haul routes. This view this has not changed since the airline was sold to Lufthansa by owner Sir Michael Bishop for £318m two years ago.

“We still think this is an attractive option,” says the Virgin boss.

Virgin, usually the lone maverick, is for once in step with the other major UK airlines over Heathrow and the need for a third runway, even though the coalition quashed the previous government’s plans to build the strip.

Ridgway says: “The UK has to remain competitive. And in the long term a third runway at Heathrow is good for the UK economy. At some point we will need to have this debate again.”

Although Ridgway is 59, a year younger than his mentor Branson, he says he has no plans for a quieter life. He says: “I’m still quite happy here. And I will stay as long as Richard does not move me on.”

Virgin’s chief financial officer Julie Southern is seen as a strong contender for his job when he does decide to cash in his airmiles. But until that time Ridgway is content to run Branson’s flagship business, which simultaneously presents itself as one of the most stylish and democratic ways to fly.