MIAMI — Virgin America entered the fray for access to Dallas’s Love Field with unabashed enthusiasm. The carrier fought hard for access to the two gates it ultimately received and announced big plans to serve major destinations with frequencies that would appeal to most business travelers. Love Field would be a market where, in theory, the San Francisco-based carrier could compete based on product rather than price. Alas, some four months into the effort it appears that plan may be cracking a bit.
Earlier this year, Virgin America indicated that service to Chicago was being scrapped in favor of connecting passengers to and from Austin. Gate space at O’Hare was cited as the reason. Switching to a higher mix of connecting passengers puts downward pressures on yields. The carrier does keep full utilization on its gates, however, which helps to keep other competition out.
Last week the fight intensified, with Virgin America launching a marketing attack against Southwest Airlines, focusing on both fares and passenger experience in an effort to win over customers. On the passenger comfort side, Virgin launched a new microsite “We Invented Higher Expectations” comparing its on-board product with that of Southwest. And the comparisons are aggressive. Virgin America calls attention to the differentiators its product offers, including assigned seats, meals for purchase, and power at each seat.
On the fares perspective, the carrier has a price match guarantee which is something rarely seen in the consumer aviation market. This guarantee only applies to non-refundable fares purchased 21+ days from travel and only if the Southwest flight is within two hours of the scheduled Virgin departure. Plus, there is a “Free-a-Friend” promotion where inviting someone to join the Virgin America Elevate program can earn that new member up to a 20% discount; plus, the inviting party can get a 2-for-1 deal when three friends enroll.
Competing on product is what Virgin America wants to be doing, especially for main cabin passengers where the hard product competes strongly against the Southwest offering. Competing on price, however, is going to be a bigger challenge for the carrier. Even with comparable frequencies to the major business destinations, Southwest has a stronger loyal customer base in the market and better ability to feed passengers on to connections to fill the planes at the best yield mix. If Virgin can only fill the planes by dropping fares, the long-term prospects for service in the market looks challenged.
Historically Virgin America has been of two camps when it comes to such competition. Some markets never developed and the carrier pulled out, often rather quickly. In other cases, it inched prices higher and other carriers typically matched, allowing better yields even where the overall numbers were less than spectacular. At Love Field, however, things are different. For Virgin America the option of pulling out after such a high-profile fight to get in is untenable. But the carrier must also manage to compete on price, not just product, or the 800 pound gorilla holding the other 90% of the gates at Love Field will continue to dominate.