Virgin america case | Operations Management homework help


Virgin America

Prior to its 2016 acquisition by Alaska Airlines, Virgin America was consistently rated as one of the top U.S. airlines. Founded in 2004, the airline served 20 destinations out of its main hub in San Francisco. Virgin America was known for its leather seats, cocktail-lounge-style lighting, onboard Wi-Fi, in-seat power outlets for electronic devices, full-service meals, and that most scarce of all assets in coach class, legroom. The airline has earned a host of awards since its launch in 2007, including being named the “Best U.S. Airline” in the Condé Nast Traveler Readers’ Choice Awards every year from 2008-2014; and “Best Domestic Airline” in the Travel + Leisure World’s Best Awards for 7 years in a row. Furthermore, Consumer Reports named Virgin America the “Best U.S. Airline” in 2013 and 2014. Industry statistics supported these accolades. In 2014, Virgin was #1 in on-time arrivals in the United States, with 83.5% of aircraft arriving on time. Virgin America also had the lowest level of denied boardings (0.07 per 1,000 passengers), and mishandled baggage (0.87 per 1,000 passengers), and the fewest customer complaints (1.50 per 1,000 passengers).

Virgin America was an offshoot of the Virgin Group, the enterprise started by British billionaire Richard Branson. Branson got his start in the music business with Virgin Records stores (established in 1971) and the Virgin Record record label (established in 1973). In 1984, he leveraged the Virgin brand to enter an entirely new industry, airlines, with Virgin Atlantic. Virgin Atlantic became a major competitor to British Airways on a number of long-haul routes out of London, winning market share through superior customer service, innovative perks for premium travelers, and competitive pricing. Branson has also licensed the right to use the Virgin brand name across a wide array of businesses, including Virgin Media (a major U.K. cable operator), Virgin Money (a U.K. financial services company), and Virgin Mobile (a wireless brand that exists in many countries). This strategy has made Virgin one of the most recognizable brands in the world. Interestingly, Branson makes money from royalty payments irrespective of whether companies licensing the Virgin brand are profitable or not. Branson himself describes the Virgin brand as representing, “innovation, quality, and a sense of fun.”

For all of its accolades and the power of the Virgin brand, Virgin America has had a hard time making money. One problem is that, as a small airline, Virgin only has a few flights a day on many routes and is unable to offer consumers the choice of multiple departure times, something that many travelers value. For example, on the popular route for tech workers between San Francisco and Austin, Texas, United offers six flights a day and Jet Blue offers two, compared with just one for Virgin America.

Another serious problem is that providing all of the extra frills necessary to deliver a high-quality experience costs money. In its first 5 years of operation, Virgin America accumulated $440 million in losses before registering a small profit of $67 million on revenues of $1.4 billion in 2013. In 2014, Virgin America went public and managed to post a respectable $150 million in net profits on revenues of close to $1.5 billion. The company was helped by an improving economy, strong demand, and lower jet fuel costs.

The key competitive issue the company faced was that it was a niche player in a much larger industry where low-cost carriers such as Southwest Airlines and Jet Blue put constant pressure on prices and crowded out routes with multiple flights daily. Virgin America charged prices that were 10 to 20% above those of its no-frills rivals, but it could not raise prices too far without losing customers and flying with empty seats, which is a recipe for failure in an industry where margins are slim. On the route between New York’s Kennedy Airport and Los Angeles during late 2012, for example, Virgin passengers were paying an average of $305 a ticket compared to an industry average of $263. Virgin’s passenger-load factor on that route was 96% of the industry average during the same period. Virgin CEO David Cush, however, was adamant that the airline “… won’t get into a fare war. Our product is good; we’ve got good loyalty. People will be willing to pay $20 or $30 more.” Was he correct? We will never know. In 2016, Virgin was acquired by West Coast rival Alaska Airlines, reportedly because Alaska wanted Virgin’s landing slots in San Francisco hub. Although Virgin continued to operate as a division of Alaska for a while, in April 2018 it was fully merged into Alaska’s operating structure, and the brand disappeared. 

Case Discussion Questions

  1. What was Virgin America’s segmentation strategy? Who did it serve?
  2. With regard to its core segment, what did Virgin America offer its customers?
  3. Using the Porter model, which generic business-level strategy was Virgin America pursuing?
  4. What actions taken at the functional level enabled Virgin America to implement its strategy?
  5. Do you think Virgin America would have been able to survive had it remained independent? (The company was acquired by Alaska Airlines in 2016.)
US Custom Writers
Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional and Experienced Academic Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.


Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.


Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.


Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.


Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.