1. Richard Branson’s decision to hire Deutsche Bank to examine strategic options for Virgin Atlantic’s future is a clear sign he has accepted the inevitable – Virgin can no longer compete with B
“Branson has been vociferous in his criticism of BA merger strategy, but his attacks have failed to stop BA's ensured dominance in the UK long-haul flying market. His reported exploration of selling his controlling interest in Virgin Atlantic suggests that he has accepted the inevitable: the airline does not have the resources to compete effectively against BA without becoming part of a larger entity.
“Given his business style, and his deep identification with Virgin Atlantic, he is clearly unwilling to maintain involvement in the management of Virgin Atlantic once its independence is lost. It is worth noting in his favour, that unlike other owners in a similar position he is not letting his personal feelings stand in the way of doing what is right for the staff of Virgin Atlantic, increasing the probability that their employment will be secure by making a deal while the airline is still on a sound footing.”
2. The A380 engine failure not only puts the reputation of Rolls Royce at stake, but also that of British business as a whole.
“The failure of the Rolls Royce on the A380 Qantas flight represent a worrying development for the company. It is not the failure of the engine in itself that is causing concern, engines do fail occasionally, and aircraft are designed for such eventuality. Rather, it is the type of failure that happened in this particular case, and the fact that it comes so soon after another British company, BP, has received so much attention for safety lapses that should cause concern.
“The engine failure in this case breached the wing, creating the spectre of a catastrophic failure. This sort of breach is rare. Aircraft engines are designed in such a way that failure should be contained within the casing.
“The engine casing failure would have been bad news for Rolls Royce at the best of times, but coming as it does at this point the reputational damage can be severe. To begin with, the news is attracting a lot of attention in North American where the parallels between BP and Rolls Royce are not too far from the mind of some observers. Both companies are some of the best known global British brands, and both challenge American competitors. In the case of BP, the company took the brunt for general distrust of deep sea oil drilling, arguably in a way that would not have been the case had the same incident happened to a large American oil company. In the case of Rolls Royce, the incident must be seen in the context of long standing competitive rivalry between Boeing and Airbus, and between Pratt and Whitney/GE and Rolls Royce.
“The A380 is the superjumbo that Boeing decided not to pursue. It represents a direct threat to Boeing's position in the Asia-Pacific market, and indirectly to Pratt and Whitney and GE. The Rolls Royce Trent 900 is the lead engine for most A380s. If the safety of this engine comes into question, it will lead to the indefinite grounding of most A380s, benefiting P&W and GE directly, and Boeing indirectly.
“It is not clear if Rolls Royce has studied BP's experience, but it is certain that as an organization that understands safety it is moving quickly to deal with the potential repercussions of the situation.”