There will be winners and losers amongst airlines this winter and Virgin is determined to be on the winning side.

It is an ideal opportunity for the niche airline to shine. As a smaller player that has never been shy of investing in its fleet, it should be able to adapt to the new high oil price environment quickly, its marketing nous will make the most of a consumer downturn and we know it has already survived one threatened cabin crew strike over pay, by appealing to its staff’s famous loyalty. If customers are going to pay the huge fuel surcharges that flying long-haul demands, then the frills and service extras that Virgin provides for its premium customers should also keep the converted faithful.

Virgin insists that its formula of serious luxury at the front of the plane and irreverence and fun at the back has already tempted British Airways passengers away from the larger airline. But the Terminal 5 dividend, that occurred this spring, is a shortlived one as with every day the performance of the new terminal improves and more passengers travel through it, with rather more success than in the early days.

Virgin can’t rely on disaffection with BA alone to grow its business. That is why the more interesting question at this point in the cycle is why Virgin is keeping almost £600 million of cash on its balance sheet. It has BMI, which was recently valued at around £750 million, in its sights and this cash would help it to achieve a transformational deal. In the meantime, the company is doing what it does best – fighting a propaganda war with the behemoths of the industry, BA and BAA – while quietly preparing itself for a well-timed acquisition that provides it with the a base for new growth, just as the market moves out of the downturn in the cycle.

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