Virgin Group, Virgin Atlantic and Delta Airlines have announced their intention to launch a brand new pan-Virgin loyalty programme with reward opportunities across all Virgin brands.
You can find out more here on the Virgin Atlantic website.
This is a further attempt by Virgin Group to bring all of its brands closer together, something which has been challenging in the past because each business has separate ownership and different shareholders. Virgin Trains, for example, is owned by Virgin Group and Stagecoach whilst Virgin Atlantic is owned by Delta, KLM, Air France and Virgin Group (now just 20%). Virgin Money is a PLC although it is in the process of being taken over by the parent of Clydesdale Bank and Yorkshire Bank.
Back in 2015 Virgin Group launched Virgin Red, an app which lets users earn points and prizes through quizzes, challenges and reverse auctions. By ‘getting to know’ the user, the app enables relevant Virgin products to be promoted. Virgin Red will be integrated into the new company.
An interesting ownership structure
Virgin Group and Delta Air Lines have founded a new entity, Virgin Group Loyalty Company (VGLC), which will own and manage the new loyalty scheme.
What is interesting is that Virgin Atlantic is not a shareholder. The airline has effectively sold its loyalty scheme to the new company, although it is not known if any money changed hands. Some deal must have been done to keep KLM and Air France happy, as they presumably invested in Virgin Atlantic assuming they would also be owning a profitable loyalty programme.
In general, moves like this are often done when an airline is in serious financial trouble. You may remember how Etihad bought the Air Berlin loyalty programme, topbonus, at an inflated price – this was a backdoor way of injecting money into the airline without breaking EU rules on foreign investment. There is no indication that this is being done for the same reason.
Who is running Virgin Group Loyalty Company?
VGLC will be launched in 2019 and headed up by Andrew Swaffield. Swaffield is the well regarded former CEO of Avios Group (he was replaced by Gavin Halliday, who left to run Etihad Guest and Etihad Holidays, and who was replaced by the current CEO Drew Crawley). VGLC will hopefully be a happier job than the one he left Avios Group to do – become CEO of Monarch Airlines ……
Andrew Swaffield said about the new programme:
“Virgin is one of the most admired brands in the UK and across the world, serving 53 million customers each year across 60 companies. Customers expect to be rewarded for their loyalty to Virgin and we want to ensure Virgin customers get the very best rewards possible. Our ambition is to bring the Virgin companies together and combine their appeal to customers, working together to create a truly outstanding offer”
Virgin Atlantic has said that there will be no changes to Virgin Flying Club for now, and that in the future members will have an expanded range of ways to earn and spend miles via the new Virgin loyalty programme.
Oli Byers, SVP Global Sales and Customer Loyalty, Virgin Atlantic, said:
“Today Flying Club offers Virgin Atlantic’s customers compelling and valuable rewards for flying on Virgin Atlantic, Delta and a range of Flying Club partners. This will continue to be the case, but at the same time we’re excited to work collaboratively with Virgin Group to build a stronger loyalty programme and unleash the power of our shared brand to reward customers for their loyalty to Virgin. We’ll be giving customers more reasons to join Flying Club and fly with Virgin Atlantic and our airline partners.”
It is important to note that Virgin Flying Club miles will be the ‘currency’ of the new scheme.
My initial concern here is how the relationship between Flying Club and Virgin Atlantic will work. As they will soon be totally separate companies, the airline will effectively be selling reward flights to the loyalty programme. It is fair to say that Avios Group and BA already work like this, but at the end of the day both companies are owned by the same parent and should be pushing in the same direction. That is not necessarily the case here.
My other worry is that Virgin Flying Club moves towards revenue-based redemption once it is legally separate from the airline. After all, it is highly likely that all of the other redemption options with Virgin Trains, Virgin Active, Virgin Media etc will be revenue-based at around 0.5p per mile.
I am also intrigued as to why Delta Air Lines is a shareholder in Virgin Group Loyalty Company but Virgin Atlantic (49% Delta owned) is not. It is worth noting that we do not know the exact split of ownership between Virgin Group and Delta.
It will also be interesting to see how the arrival in 2019 of KLM and Air France as Virgin Flying Club earning and redeeming partners is impacted by this.
With Virgin Group as a shareholder, I am confident that VGLC will be a success. Virgin Group will be able to put pressure on Virgin-branded businesses to sign up, and it could become a contractual requirement for new partners.
We will keep you updated as we find out more …..
The Virgin Atlantic website has the full statement here.
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