Steve Ridgeway: Virgin operates from where consumers want, for now that's Heathrow

Steve Ridgway, Virgin’s outgoing chief executve, talks about his frustration over the runway debate and how securing short-haul routes can keep the pressure on British Airways.

 Steve Ridgway may have another six months before he disembarks Virgin Atlantic for good, but the airline’s long-standing chief executive already appears to be in holiday mode.

The man who has dedicated the past 23 years of his life to Sir Richard Branson’s aviation group has taken an hour out to relax at a corner table at the Delaunay restaurant on Aldwych, and he’s in the mood for small talk as he sips on a fruit smoothie.

“I only went out on my boat once or twice this summer,” the 61-year-old laments, referring to a speedboat, which he hopes will see far greater use after his retirement in April.

“I told Richard I wanted to leave before a summer and I’m glad it wasn’t this one,” he adds as we bemoan the appalling weather.

When it was announced in September that Mr Ridgway planned to retire after 11 years as chief executive of Virgin Atlantic, the news was met with surprise.

Industry rumours suggested the decision was linked to Ridgway’s pay, after he said in an interview just weeks earlier that his £350,000-a-year salary and no bonus was “not as high as I’d like it to be and my bosses know that”.

It was a fair point, given that Ridgway is the poor man among his peers in the UK aviation industry. By contrast, British Airways chief executive Keith Williams receives a basic salary of £650,000, while Carolyn McCall at easyJet is on £665,000 a year before bonuses. Even Ryanair’s Michael O’Leary, who recently claimed to be the “most underpaid and underappreciated airline boss in Europe”, received €768,000 (£623,608) last year in basic salary.

Mr Ridgway laughs at the conspiracy theories. He insists that he mentioned to Sir Richard – “Richard” to him – at the start of the year that it was approaching the time for him to step out of the cockpit. As for his comments about his pay: “That was just a bit of naughty fun and it certainly wasn’t said in that context.”

So pay wasn’t a problem then? “No, not in that way,” he smiles. The Virgin chief, who lives on a houseboat in Chelsea, plans to take next summer off, but has no intention of jetting off into the sunset for good.

He hopes to take on some non-executive directorships and will get more involved in the hotel he owns in Cornwall with his brother Hugh, called St Moritz.

“I’d like to see that grow. I have also got a few other things,” he says, adding that he has always been interested in “design and innovation”.

Ridgway will leave Virgin at a turbulent time for the industry, when sky-high fuel prices and a squeeze on consumer spending are putting airlines under extreme pressure.

Virgin swung to an £80.2m loss in the last financial year, despite revenues climbing 3pc to £2.7bn. Rival long-haul carriers are sheltering from the economic headwinds behind new strategic partnerships, such as the codeshare agreement recently announced between Air France and gulf carrier Etihad, and Emirates’ tie-up with Qantas.

Analysts believe Virgin, which is 49pc owned by Singapore Airlines, is in a particularly vulnerable position following BA’s takeover of bmi, which used to feed UK domestic passengers into Virgin’s long-haul network. The £172.5m sale to BA by Lufthansa was approved in March following a short investigation by the European Commission (EC).

Sir Richard was so riled by the EC’s decision to wave through the takeover “in just 35 working days” that he launched a legal appeal, which is likely to roll on for several years.

In the meantime, Virgin has applied for the 12 pairs of Heathrow take-off and landing slots that are up for grabs following the deal to launch its own short-haul operation, serving Manchester and Scotland.

Irish carrier Aer Lingus is competing for some of the slots to launch services between Edinburgh and London. Aviation analysts believe Virgin must win the slot battle if it wants a sustainable way of feeding its long-haul network to destinations such as New York, New Delhi and, as of next week, Mumbai.

Ridgway, who has seen “three or four” serious aviation downturns during his career, shrugs off all talk of Virgin’s fight for survival.

It’s a story he has heard many times over the decades since he joined the company in 1989 as managing director of Virgin Freeway, its frequent flyer programme.

“People say to me, 'surely it’s getting much tougher for you now?’. But it was probably never tougher than when we had one or two planes [in the late 1980s].

“We were a tiny player at Gatwick, but now we are a £3bn organisation with 6m passengers a year, a set of routes and slots at Heathrow that you couldn’t replicate today.

“It’s never easy and even in the good times margins are very thin. In our 28 years we have had very few years of losses.”

Julie Southern, Virgin’s chief commercial officer, and Rob Fyfe, Air New Zealand’s outgoing boss, are among the favourites to take over from Ridgway, but the launch of short-haul is one last hurdle he’d like to clear before heading for the exit.

He admits that Virgin should have done the deal with bmi itself “a long time ago”, specifically in 2009 when Lufthansa took control. But “that’s history now”, Ridgway says hastily, and he has been shouting loudly in Europe that the only way to ensure there is effective competition with BA on key feeder routes to Heathrow is if the 12 slot pairs are kept together.

Short-haul may finally be within Virgin’s grasp, but one long-held goal – to see a clear and long-lasting aviation policy in the UK – isn’t even a spot on the horizon. A fact that Ridgway finds “frankly quite depressing”.

He has been in the industry for more than two decades and during that time, no new runways have been built in the South East.

Ridgway is usually less excitable than his industry peers, in particular IAG’s Willie Walsh, but he can’t help betraying his frustration over the inertia of successive governments.

The Coalition has kicked the airport expansion debate into the long grass by setting up the Davies commission, which won’t report until 2015.

“That is a long time and it’s an overly long time,” says Ridgway. “All I would say is, let’s get to 2015 and make sure we have a completely full evaluation, alignment right across the political spectrum and that we have cleared the decks in terms of noise, environment, planning etc... so that the day after [the final report is released] the button can be pressed. Because if you don’t, you have another five years of environmental impact studies, planning battles etc.”

In the past, Virgin has stressed the importance of a hub but has been more reluctant than the likes of BA to pin its colours to Heathrow’s mast. BA has ruled out flying from “Boris Island”, even if the Estuary airport does get off the ground.

Today, however, Ridgway makes Virgin’s case perfectly clear: “Virgin would operate from wherever there is a hub that consumers want to fly from, and right now, and for the foreseeable future, in affordability terms, that is Heathrow.”

“There are many different business models in aviation, and there absolutely needs to be regional aviation and strong point-to-point flows to other markets. But if you’re going to connect the UK to the world, you need to be doing that through a hub.”

Ridgway may be on his way out but he can’t resist one parting shot at ministers before he heads for the door.

“It annoys me that people who build bits of planes are absolutely loved – whether it’s Rolls-Royce building the engines and exporting them or Airbus building all of the wings at Broughton and exporting them.

“But what doesn’t seem to be loved is us actually flying the planes and that is bizarre.

“If you look at companies such as BA and Virgin in terms of overseas sales, we generate many billions a year, so we are a pretty large exporter in our own right.

“No one ever thinks of us as an exporter, they think we have to be taxed and regulated, whereas normally exporters are loved, so I do find it very frustrating.”

Those he is leaving behind in the aviation industry will be hoping ministers are listening.

http://www.telegraph.co.uk